Originally posted by WTFH
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Rearranging shareholdings
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Originally posted by ittony View PostNo, I misunderstood your enigmatic Wikipedia link to imply I wanted jam today from an accountant.
They tell you much jam you have, how much you owe to the jam fiends at HMRC, and they take some of jam to fund this.
Jam is money.See You Next TuesdayComment
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Originally posted by Lance View PostDoes Harry realise that with just 20% of the shares, Tom and Dick can simply increase the number of shares in the business and effectively dilute Harry as low as they desire? This is legal, and common. Only a rigid contract can prevent this.
Originally posted by Lance View PostAll I can think is there are two scenarios here.
1. Tom and Dick are trying to get loads of free work from Harry. Tom and Dick are smart. Harry is an idiot.
2. Tom and Dick are idiots. Harry doesn’t realise this so is contemplating working with them.
There’s no way near enough detail to make any better informed decisions.
If Harry is smart he’ll either walk away or seek professional legal advice.
I was really only after some advice on the mechanics of changing the shareholding percentages, rather than the prudence of the entire venture.Comment
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Originally posted by ittony View PostNo. It's nothing so convoluted or devious at that. I would be going into business with an established company and receiving shares on the understanding that I'd do a big piece of redevelopment work up front and have an ongoing involvement in the business. I could forfeit some of the shares if I left, under a bad leaver clause.
If it's a profitable business why would they give you some of it rather than pay you for the work?
If it's completely open and honest then the only reason is because it costs them less to give you shares than to pay you.
Or they expect to have much greater need of you later, and if you have shares you have skin in the game.
Either way, and still assuming honesty, you need legal help. If this works out you'll be there for the long term. Are they ever going to pay you a wage, or are you doing all the work for just 20% of the profit?
What happens if Tom dies?
What happens if Dick shags Tom's wife and they fall out?
What if the company runs out of cash and you're expected to put your hand in your pocket?
All this, and more, needs thought and legal paperwork. And that's for an honest relationship.See You Next TuesdayComment
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Originally posted by ittony View PostYes, this would all be tied up in a Shareholders Agreement.
There is also the possibility that none of them are idiots and all of them are well intentioned. And yes, I'm aware that the road to hell is so paved, but nevertheless.
I was really only after some advice on the mechanics of changing the shareholding percentages, rather than the prudence of the entire venture.
Why not have the share method sorted out when the shareholder agreement is done? Presumably that's being done by a solicitor who knows all these things?
Oh. And good luck. I urge caution as I've seen too many of these go wrong.See You Next TuesdayComment
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Originally posted by Lance View Postyou misunderstand the accountants relationship to jam as well.Comment
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Originally posted by Lance View PostSounds like it's more well thought out than it seemed at the start.
Why not have the share method sorted out when the shareholder agreement is done? Presumably that's being done by a solicitor who knows all these things?
Oh. And good luck. I urge caution as I've seen too many of these go wrong.Comment
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Originally posted by ittony View PostTom and Dick have 70 and 30 of 100 shares respectively. They want to get Harry on board and rearrange things so that Tom has 55%, Dick has 25% and Harry has 20%. How can this be achieved?
They can't just issue Harry with 25 new shares (giving him 25/125 = 20% of the business) because this would leave Tom with 56% and Dick with 24%. Would new shares have to be issued to all three of them in order to get the percentages exactly as required, and if so would Tom and Dick have to pay tax on these even though their stake in percentage terms was decreasing?
- Capital gains tax on the transfer to Harry - possible holdover relief here;
- Value Shifting implications if new shares are issues - again tax on Tom & Dick
- Employment related securities issues - more relevant in issuing shares but still to be considered
- An iron clad shareholders agreement to cover all parties
- Plenty of luck to ensure the working relationship doesn't go sour
You won't get answers to the above without paying for professional advice and that will cost a reasonable amount to ensure it is done properly.
Martin
Contratax LtdComment
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My money will be number 5 all day long.
From what I remember, every single post about working for equity in the company has failed to produce a penny for the contractor.'CUK forum personality of 2011 - Winner - Yes really!!!!Comment
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Originally posted by northernladuk View PostMy money will be number 5 all day long.
From what I remember, every single post about working for equity in the company has failed to produce a penny for the contractor.
Maybe.Comment
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