Share restructure. Alphabet shares for better divi distribution.

[m0n1k3r]

MyCo has three classes of shares. All shares have equal rights. There is sound business reason for doing so.

There is usually little reason for having different classes of shares if they all have the same rights, unless you want to make the classes separately redeemable or such.

[pscont]

LOL, we got moved to General. That's probably my fault for taking shots at the mods. Rather than clean up their horrible behaviour(!!!!) they moved it to General! Shocking, that!

Ok, one more serious comment here:

You could certainly sell shares with equal rights for an equal share of the company's value. And if you used the same class of shares then as long as you don't have a wildly inappropriate valuation, you should be fine.

But if you have alphabet shares, then presumably the purpose is to pay different dividends to the different classes. If dividends are disparate then that should have been reflected in the sale price. If you sold the shares at 1/103 of the value of the company but pay dividends of, say 1/3 of the disbursed dividends to these shareholders, HMRC is likely to look askance at that and say this is a settlement.

I'll give you an example of a business reason. I have an employee who is working on a long-term R&D project. He's no longer contributing to the general revenue of the company. So we converted his shares to another class of shares. If this project pays off like we think it will, he's going to make a killing on it, because his shares are going to get a really nice dividend that nobody else gets. But his shares aren't getting any dividends now, because we don't know if this is going to be a profitable project or not, and because he's not contributing to the profit of the company right now.

The project might fail. It might not sell. There's risk but also a huge upside for him and a big part of that will be dividends. That's why we changed his class of shares.

That's a business reason. We use employee ownership as a means of profit-sharing and we have two distinct revenue streams, one actual and the other potential. This divide is reflected in the class of shares owned by the employees who produce the different streams.

What is your business reason for selling alphabet shares (instead of just more shares of the same class as yours)? What in your business justifies that?

What you say makes sense, but this setup doesn't stop HMRC questioning why at some point someone owning AB shares got a huge dividend, compared to the other shareholders.
I dont think the "potentiality" of revenue will fly with HMRC because it is artificial and really hard to prove/disprove.
At the end of the day AB shares will almost certainly bring different dividend distribution which, is the point really.
Question is what factors will make it bulletproof to the settlement regulation and we are not talking about spouse here, but any shareholder.

[pscont]

To extend the topic a little.
Has any of you gifted (or sold) shares to your mother/father/grandad(mom)? Regular shares. And what happens when you pay divi on those?
Say you are poor spouse-less sod (not hard to imagine on this forum) and you want your old guys to have some extra money to their pension.

[northernladuk]

But that is exactly what the legislation is there to stop so surely its a complete no no for exactly the reason you want to do it. That would be the perfect scenario of non business related aggressive avoidance.

It also sums up your whole poor approach to trying to push the boundaries too far with your daft ideas.

[WTFH]

To extend the topic a little.
Has any of you gifted (or sold) shares to your mother/father/grandad(mom)? Regular shares. And what happens when you pay divi on those?
Say you are poor spouse-less sod (not hard to imagine on this forum) and you want your old guys to have some extra money to their pension.

Do these relatives live with you (or you with them)?
Would this money be coming back to you directly or indirectly?
Would this money be used to offset any payments that you would be making to them or on their behalf?

[pscont]

Do these relatives live with you (or you with them)?
Would this money be coming back to you directly or indirectly?
Would this money be used to offset any payments that you would be making to them or on their behalf?

1. No.
2. Depends.
3. No.

[pscont]

But that is exactly what the legislation is there to stop so surely its a complete no no for exactly the reason you want to do it. That would be the perfect scenario of non business related aggressive avoidance.

It also sums up your whole poor approach to trying to push the boundaries too far with your daft ideas.

On what basis? Because they are your relatives?
What if it was someone else who is a shareholder - friend of some sort. There must be a clear cut where this is not a problem.
Or it only works for unrelated persons - think of shareholders of amazon (if/when they pay dividend).

[northernladuk]

On what basis? Because they are your relatives?
What if it was someone else who is a shareholder - friend of some sort. There must be a clear cut where this is not a problem.
Or it only works for unrelated persons - think of shareholders of amazon (if/when they pay dividend).

Why the **** would you give a portion of your hard earned profit to a friend for nothing?

[pscont]

Why the **** would you give a portion of your hard earned profit to a friend for nothing?

I never said it is for nothing, if you could be arsed to read the topic.
Also, I wont, and this is more of an example situation.

[Zigenare]

Why the **** would you give a portion of your hard earned profit to a friend for nothing?

Why the **** would you bother responding to such a wind up merchant?

Zig - In "don't answer that" mode!