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Company shares and separation

DocQuincy
Posts: 249 Forumite

I am director of a small limited company. Just me as owning all shares except wife who just draws enough in dividends to use her tax free allowance. Currently £500 per year.
She is wanting to separate. I am the only other shareholder. Nothing in the way of assets other than computer equipment needed for the job.
My accountant sorts it out so I assume he works out her shares based on £500 relative to the amount the company made in profits. Most years from memory, she never signs anything.
He is away at the moment.
I draw a basic wage (£800 a month) and about £30k in dividends. Can I just remove her as a shareholder? If not, are her shares likely to be with £500?
Seeing as I've built the business, done all the work and have her the sheets for nothing, what kind of position am I in?
Just weighing things up.
Thanks.
She is wanting to separate. I am the only other shareholder. Nothing in the way of assets other than computer equipment needed for the job.
My accountant sorts it out so I assume he works out her shares based on £500 relative to the amount the company made in profits. Most years from memory, she never signs anything.
He is away at the moment.
I draw a basic wage (£800 a month) and about £30k in dividends. Can I just remove her as a shareholder? If not, are her shares likely to be with £500?
Seeing as I've built the business, done all the work and have her the sheets for nothing, what kind of position am I in?
Just weighing things up.
Thanks.
0
Comments
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Your opening sentence is incorrect. If she is taking a dividend then you cannot be the 100% owner of all shares in the company - if you are 100%, then you have been complicit in tax fraud since £500 paid to her cannot be a dividend from shares she does not own.
no you cannot just "remove" her shares!!! Just the same as you cannot take cash out of her pocket and claim it is now yours, that would be theft (married or not). You can't just decide that whereas it was "convenient" for tax purposes to let her have a dividend income, it is no longer so and you want to pretend the whole set up never happened just because your marriage is failing.
look on companies house, the number and class of shares issued will be recorded on there. That is your start point.
assuming there is only one class of share, which therefore means each shareholder has an equal right to a dividend, then in very crude terms, if the total dividends paid for the year are £30,500, then you own 98.3% of the shares issued and she owns 1.7% of the issues issued. Companies House info will confirm how many shares exist and thus how many actual shares each person owns.
what 1.7% of the share capital of the company is worth is a question for your accountant since valuing a company whose shares cannot be easily sold on the open market is an art, not science. That said, the shares most certainly have a value, if nothing else they confer a right to receive a dividend, recently worth £500 for a year. However, they may be worth more than one year's dividend since next year you might decide to declare a mega dividend (or no dividend!)1 -
Thanks, I honestly have no idea hence the question. And I meant I own everything except what she had, not 100%.
I'm not wanting to end things but I know that doesn't take affect things.
If she's owns 1.7% of the company, for arguments sake, are my options:
Buy her out at a price we agree on
Keep giving her £500 per year
Dissolve the company and go as sole trader
I guess my question is, can she insist on more than £500 per year? My accountant reconciles the accounts do she always gets £500 regardless. I'm not wanting to do anything illegal, just clueless and keen to know where I stand.
Thanks.0 -
In outline. Cease trading. Start a new company. Your ex's only entitlement will be the nominal share capital she owns. Your accountant can guide you.1
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DocQuincy said:
I guess my question is, can she insist on more than £500 per year? My accountant reconciles the accounts do she always gets £500 regardless. I'm not wanting to do anything illegal, just clueless and keen to know where I stand.
Thanks.
if there is only one class of share then each shareholder gets the same rate, you cannot vary the rate between people, only between class of share.
so no, she cannot insist on £500, she will get what is declared, just like you will.
The accountant presumably has "reverse engineered" the dividend rate by starting from the 500 lump sum and arriving at a dividend rate declaration to several decimal places, rather than a round sum such as the 102 example I mentioned.
Please confirm exactly how many shares you and she own each and crucially are they the same class of share??
The only way an accountant can pay her 500 per year is
- Either she holds a different class of share to what you do and therefore her rate is different to yours.
- Or you have been getting the same 30,000 per year whilst she gets 500 and if profits have been more than that, any remaining balance has been left in the company rather than being paid out as dividends. You can easily check that by looking at the reserves figure on the balance sheet of you accounts, if it increases year on year then some profits have not been paid out.
Sounds like you need to get your accountant to explain things more clearly.
Being a shareholder means you own the company, Unless there are different classes of shares then she has as much right to the company as you do. In the case of only one class of shares in existence, that right is expressed as the % of the company's total shares issued that she owns. Assuming one class, then upon closure of the company she has a right to her share of whatever is leftover after all bills are settled. It is near unlikely that will be exactly £500, much more likely it would be a lot more or a lot less, depends how much actual cash is left in the company bank after any assets have been sold, all debts have been collected, and all creditors paid off. In crude terms, what is the company actually worth in cash money after it has ceased trading..
Read up on what being a shareholder means. I appreciate this is based on USA law, but the principles are the same and I can't be bothered to find a UK webpage covering the same explanation:
Shareholder Rights in Business Dissolution Explained - Attorney Aaron Hall2 -
Hoenir said:In outline. Cease trading. Start a new company. Your ex's only entitlement will be the nominal share capital she owns. Your accountant can guide you.0
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DocQuincy said:Thanks, I honestly have no idea hence the question. And I meant I own everything except what she had, not 100%.
I'm not wanting to end things but I know that doesn't take affect things.
If she's owns 1.7% of the company, for arguments sake, are my options:
Buy her out at a price we agree on
Keep giving her £500 per year
Dissolve the company and go as sole trader
I guess my question is, can she insist on more than £500 per year? My accountant reconciles the accounts do she always gets £500 regardless. I'm not wanting to do anything illegal, just clueless and keen to know where I stand.
It would be surprising for a wife to own just 1.7% though, so better say what the real percentage is.
If you dissolve the company then she would get her share percentage of anything thats liquidated from the company.
There are other options, like increasing your salary and not declaring any dividends, obviously this is less tax efficient but some will be happier paying HMRC than their ex.1 -
Thanks all, I'll speak to my accountant to clarify.I'll look at what's best including salary increase and going sole trader.The company has virtually nothing in the way of assets. It's literally me and a computer.0
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