Becoming shareholder & dividends

dangermouse101

I am in a pleasant situation in that I have been in my current job with a small engineering consultancy (Ltd company) for six years and despite some rough times the company is coping well in the downturn. The two company directors are in their fifties and thinking long term about the future of the company, so have made me an Associate and offered me shares.

They are proposing to cut my salary by £6.5k per annum however pay me dividends on 10% of shares. These dividends would bring my nett income back up to the same level as now, even when £100 a month is deducted to be paid to them for the shares (on a 50 month term).

I have two points about this arrangement that I am uncertain of:

1. I will be looking to get a first time mortgage (for an affordable housing scheme) next year, and am not sure of the salary + dividends versus salary view a mortgage company would take.

2. I would be paying much less of my student loans off (based on salary) and would probably have to look at paying voluntary amounts off if only to pay the interest off each year. This would then effectively leave me out of pocket from my current situation.

Has anybody had any similar experience? I have alot of research and number crunching yet to do but would appreciate any experience.

mountainofdebt

Hang on a minute

So you lose a guaranteed £6500 and MIGHT get £6500 back in dividends ? What happens if the company makes a loss - trust me engineering consultancies are not immune to downturns, especially in this economic climate.

Sounds like a back-handed way of reducing your salary to me and you'd be mad to agree to it.