Ltd. Company Share Structure

[Deleted member 156099]

Hello.

I am new to the forum and have found it very useful for answering some of my startup worries / questions. I was hoping someone could advise me on the following:

I am currently self employed, and soon to be starting a Ltd Company. Myself and colleague will be shareholders and directors.

We both have a large amount of equipment to put into the company, about 15k each. We are then putting in a personal contribution of £1,000.

When we issue shares, should the value of the assets we are putting in be reflected in the number of shares issued? Or should the capital be be based on our personal contribution?

For example, we have 30,000 shares at £1 that reflect our equipment. If we assume we would split the company 60/40 due to other factors that would be 22,000 / 18,000 shares.

In addition, would this have any tax implications?

Many thanks, I am looking forward to hearing your feedback.

Ray.

 

[Scalloway]

I would advise putting in a low share capital, eg £100 and putting the balance as directors loans. The reason for this is that you can withdraw money from a director's loan account with no tax consequences if funds permit.

I would stronly advise getting a shareholders' agreement in place to prevent disputes further down the line.

 

[Deleted member 156099]

Thanks for the feedback Scalloway, with regards to a share holders agreement are there any key terms you would recommend based on the information I provided?

 

[teddys]

You could always get a standard template of the shareholders' agreement on the internet. However, there are a few points worth noting:

a) A company form is quite different from a partnership structure. So, it is never advisable for two persons to be directors and then be shareholders too at the same time with 50:50 stake.

b) The agreement should have unambiguous and implementable exit options that the shareholders could exercise at a future date.

c) Agree a particular valuation method (e.g. x times the next profit), if possible, as part of the exit option.

d) To avoid lengthy litigation costs it is common to have a clause binding the shareholders to attempt mediation in accordance with the Centre for Dispute Resolution Model Mediation Procedure

 

[Deleted member 156099]

Thanks Teddys, makes sense to me.

 

[Deleted member 156099]

In the immortal words of Columbo, just one more thing Sir...

Its a question I have asked on another forum but you chaps might have an alternative take on it:

ukbusinessforums.co.uk/forums/showthread.php?t=276723

Thanks again.