Advice on LTD company shares


S

SPD

I am going to form a LTD company to sell IT solutions.

I have been advised to set it up with 100,000 shares. but only allocate 1 to
myself. I will be the sole director and share holder to start with.

the idea is to enable me to use shares as an incentive if required latter
for high quality staff and or outside investment.

I would like some opinions on this from the experts in here.

I have 2 main questions about this arrangement

1 - if the company has to close for any reason will the large amount of un
issued shares worth 1 each mean I have to put money into the company to
close it down?

2 - if the company pays dividends but has only issued 1 share to me and the
rest are still within the company do the un issued shares get dividends?

I.e. if the company issue a share dividend of £100 per share, obviously my 1
share will get £100 do the other 99,999 shares also get £100 even though
they are un issued?

Thank you for your time and help
 
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M

Mike Lewis

SPD said:
I am going to form a LTD company to sell IT solutions.

I have been advised to set it up with 100,000 shares. but only allocate 1 to
myself. I will be the sole director and share holder to start with.

the idea is to enable me to use shares as an incentive if required latter
for high quality staff and or outside investment.

I would like some opinions on this from the experts in here.

I have 2 main questions about this arrangement

1 - if the company has to close for any reason will the large amount of un
issued shares worth 1 each mean I have to put money into the company to
close it down?
No, you only have to pay for shares that are issued. In fact unless you have
some reason there is no need to have such a large authrised maximum.
Althopugh such a large maximum does no harm either.
2 - if the company pays dividends but has only issued 1 share to me and the
rest are still within the company do the un issued shares get dividends?
No.

I.e. if the company issue a share dividend of £100 per share, obviously my 1
share will get £100 do the other 99,999 shares also get £100 even though
they are un issued?
No.

You have to distinguish between the authorised share capital and the issued
share capital. The authorised is the maximum number that the sharehlders
have authorised the directors to issue. The directors may issue as many
shares as they like up to the maximum authorised but are not obliged to do
so.

Mike Lewis
Chartered Accountant
 
J

Jon Griffey

SPD said:
I am going to form a LTD company to sell IT solutions.

I have been advised to set it up with 100,000 shares. but only allocate 1 to
myself. I will be the sole director and share holder to start with.

the idea is to enable me to use shares as an incentive if required latter
for high quality staff and or outside investment.

I would like some opinions on this from the experts in here.

I have 2 main questions about this arrangement

1 - if the company has to close for any reason will the large amount of un
issued shares worth 1 each mean I have to put money into the company to
close it down?
No. You only have to put money in during a liquidation if shares are
issued partly paid, up to the amount that you subscribed for.

2 - if the company pays dividends but has only issued 1 share to me and the
rest are still within the company do the un issued shares get dividends?
I.e. if the company issue a share dividend of £100 per share, obviously my 1
share will get £100 do the other 99,999 shares also get £100 even though
they are un issued?
No. Only issued shares attract dividends.

Usually a large authorised share capital does no harm, but you can find
that standard company mem and arts allow the directors to allot these
authorised shares to whosoever they please, and not necessarily offer
them to existing shareholders (pre-emption). Can therefore give scope
to shaft minority shareholders.

Even if your company was formed with say 1,000 authorised shares this
can always be increased or subdivided later on if need be fairly easily.
--
Jon Griffey FCCA CTA
Hackett Griffey
Chartered Certified Accountants & Registered Auditors
2 Mill Road, Haverhill, Suffolk, CB9 8BD

Tel (01440) 762024

www.hackettgriffey.com

See website for disclaimers
 
K

Keith

Mike Lewis said:
No, you only have to pay for shares that are issued. In fact unless you have
some reason there is no need to have such a large authrised maximum.
Althopugh such a large maximum does no harm either.
It used to incur heftier registration fees with Co. House/formation
agents but I'm not sure whether that's the case now.

Thinking ahead - if the OP is looking to use shares as 'incentives'
would you recommend 'A' class and 'B' class shares, with only 'A' class
shares having voting rights ?

1,000 'A' / 9,000 'B' has a nice symmetry, gives good opportunity for
loyalty/ golden handshake bonuses and would do so without diluting the
executive management structure.
 
M

Mike Lewis

Keith said:
In message <KvxXg.21716$6C2.2211@newsfe6-gui.ntli.net>, Mike Lewis

It used to incur heftier registration fees with Co. House/formation
agents but I'm not sure whether that's the case now.
That must have been a long time ago as I have no recollection of it in the
last 20 years.

Mike Lewis
Chartered Accountant
 
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J

Jon Griffey

Keith said:
Thinking ahead - if the OP is looking to use shares as 'incentives'
would you recommend 'A' class and 'B' class shares, with only 'A'
class shares having voting rights ?

1,000 'A' / 9,000 'B' has a nice symmetry, gives good opportunity for
loyalty/ golden handshake bonuses and would do so without diluting the
executive management structure.
You need to be very careful about the Employment Related Securities
legislation. This is nasty, complex, unfathomable stuff that rears its
ugly head whenever you do anything with shares.


--
Jon Griffey FCCA CTA
Hackett Griffey
Chartered Certified Accountants & Registered Auditors
2 Mill Road, Haverhill, Suffolk, CB9 8BD

Tel (01440) 762024

www.hackettgriffey.com

See website for disclaimers
 

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