Given shares and asked to be MD of a Ltd company

mezzor

I'll try and be as straightforward as possible but I just have no idea where to start...
I am an employee of a Ltd company
Ltd company is made up of 2 owners, one 

comeandgo

My opinion is he is trying to off load his shares so he does not have to declare them in his assets on divorce.  After the divorce he will want them back.  I’d tell him you are not interested in his scheme.

tripled

Have you signed anything?

There could be potential tax implications if there shares have any value.
You may get dragged into messy divorce proceedings, particularly as his wife is also a shareholder.

In theory, if you hold all the A shares, you can make yourself the MD whether he likes it or not. However, in reality, it sounds like you are being used as a pawn, with a hollow promise of perhaps becoming the MD one day to encourage your compliance.

mezzor

tripled said:

Have you signed anything?

There could be potential tax implications if there shares have any value.
You may get dragged into messy divorce proceedings, particularly as his wife is also a shareholder.

In theory, if you hold all the A shares, you can make yourself the MD whether he likes it or not. However, in reality, it sounds like you are being used as a pawn, with a hollow promise of perhaps becoming the MD one day to encourage your compliance.

Not signed anything. Companies House shows that the shares were issued with 750 A each at 1GBP (Not sure if that makes a difference). Have tried to speak to the company accountant for advice but obviously a clear conflict of interest there.

Am fully aware of the fact I'm being used here, already been given a generous wage rise and promises of dividend payments annually etc. I already ran the business anyway, just didn't have any control over the bank accounts or bookkeeping side of things which he says he wants to "Give me access" to. My guess is he will still want to retain core access.

CKhalvashi

I'd suggest that this could come back to bite you in this case and won't be the long term arrangement you appear to be under the impression it possibly is.

As with any investment of this nature, I'd advise seeking legal advice and ensuring your own rights are protected. I've been known to prefer joint ventures over the last few years (but never in these circumstances) and independent advice on exactly what your rights are has been essential to any transaction of this nature, even if you find your own representation and your employer agrees to pay for it.

DullGreyGuy

You have 14 days to register the change in person with significant control, which you will be owning 75% of the company. 

As the only shareholder with a vote it then purely becomes your choice who the directors of the company are so you could remove him as a director and install yourself as CEO rather than MD. As CEO you can then give yourself whatever salary you want. 

Clearly he is intending to deprive himself of assets to stop his ex getting their fair share, the courts can penalize him for doing this. Clearly he is also not really gifting you the company and will want the shares back once the ex is out of the picture, you are getting a promise of a promotion to go along with his scam

mezzor

DullGreyGuy said:

You have 14 days to register the change in person with significant control, which you will be owning 75% of the company. 

As the only shareholder with a vote it then purely becomes your choice who the directors of the company are so you could remove him as a director and install yourself as CEO rather than MD. As CEO you can then give yourself whatever salary you want. 

Clearly he is intending to deprive himself of assets to stop his ex getting their fair share, the courts can penalize him for doing this. Clearly he is also not really gifting you the company and will want the shares back once the ex is out of the picture, you are getting a promise of a promotion to go along with his scam

Yes I’m under no illusions that he will want them
back etc. Nor that this is a long term thing. But there will be changes and I just want to position myself where I benefit from it and protect myself. Like I say, I’ve had a decent pay rise out of it and then he’s dangled the carrot of dividends in the future so I’m not blind to what he’s doing. 

tripled

The nominal value of a share is the amount the shareholder needs to pay if the company is wound up. It has nothing to do with the company value, which fluctuates. Limited company shares can be difficult to value, as the shares are not traded on the market, but if you receive shares as an employee, you can bet that HMRC will be expecting a cut.

To transfer the shares it would need to be properly recorded, that's company meeting minutes approving the transfer, you being given the share certificates, and the transfer form being given to companies house. You may need to get the business valued and pay any taxes due to HMRC. There may be legal repercussions if not done correctly.

If you are pushed to take on the shares, you need proper advice to make sure you don't end up dragged into his divorce, or in trouble with the Insolvency Service or HMRC.

TELLIT01

If the OP knows this is being done to avoid handing shares over as part of a divorce settlement, and agrees to participate, is he not at risk of being tied up in fraud or other legal action.  If it was straightforward I'm sure everybody who owned a limited company would do the same thing.  I doubt it is without major risks.  I would certainly say that I would want to take legal advice before doing anything.

tightauldgit

It seems like an utterly pointless endeavour as obviously he is trying to hide the shares from the court/his wife in the divorce but it will unravel in about 5 seconds if it comes to court as obviously his wife will ask what happened to the shares in the company he owns and he'll have to say 'oh i gifted them to random employees a few days after we split up for no compensation because reasons' and he'll be right in the proverbial. 

If I felt like being moral I'd tell him no thanks and resign immediately as I don't want to work for a **** like that, if i was feeling evil I'd take the shares, liquidate the company, and take the proceeds to the Bahamas.

DullGreyGuy

tripled said:

To transfer the shares it would need to be properly recorded, that's company meeting minutes approving the transfer, you being given the share certificates, and the transfer form being given to companies house.

The company doesn't need to approve the transfer of shares from one person to another, would be a major issue if a company had to approve each sales/transfer of each share.

They will have to register it with companies house within 14 days as already stated.