Transferring shares - what do I need to know?

shefftyke · 13 October 2016 at 3:33PM

I'm currently a Director and shareholder in a limited company - I have two business partners and we each own an equal share - 1/3 each.

I have decided to move on to a new role and have therefore resigned from my position as a Director and I would like to give my shareholding to my business partners. I don't want any money for this - I simply want to give them the shares.

However, I've been informed that if I give the shares I might be personally liable for tax on the shareholding - is this correct?

I want to leave the business and all profits/liabilities behind with it. What are the basic things that I need to do to achieve a clean exit?

Obviously, any help is greatly appreciated.

Lafuma · 13 October 2016 at 6:57PM

shefftyke wrote: »

I'm currently a Director and shareholder in a limited company - I have two business partners and we each own an equal share - 1/3 each.

I have decided to move on to a new role and have therefore resigned from my position as a Director and I would like to give my shareholding to my business partners. I don't want any money for this - I simply want to give them the shares.

However, I've been informed that if I give the shares I might be personally liable for tax on the shareholding - is this correct?

I want to leave the business and all profits/liabilities behind with it. What are the basic things that I need to do to achieve a clean exit?

Obviously, any help is greatly appreciated.

Disposal of shares could give rise to a Capital Gains Tax (CGT) liability.

But I can't see how you could be making any gain if you are giving the shares away.

Which leads onto the question as to why you are giving this asset away??? :huh:

Presumably you could keep hold of them and receive any dividend declared.
If you do want to dispose of them, why not sell them for the best possible price you can get? If they are paying divi's out regularly, I'll take them off your hands for a small sum

At least try and get back what you paid for them, or their nominal value.

You mention liabilities...
As a limited company, the shareholders are limited as to any losses that may occur - that loss is limited to the nominal value of the shares they own (which is usually what they paid for them in small, startup companies).

shefftyke · 14 October 2016 at 9:12AM

Thanks for the response.

The business is only 18 months old and as such we're making profit but still partly paying off year one. Alas, we're not paying dividends out at the moment - simply reinvesting profit back into the business.

I've decided the lifestyle isn't for me and have had an excellent offer in another industry - therefore I want the smoothest and easiest exit possible. I want the business to continue to grow successfully and giving the shares to my business partners is the best way for that to happen (in my opinion).

When we set up the business we all bought a share each for £1 - so does that mean the liabilities would be limited to £1? Saying that - there are no liabilities that we owe to other business - just money we owe to ourselves as part of financing the business for year one.

So to paraphrase - you believe that giving the share away (or selling it for £1) would lead to zero capital gains tax because I've not made a gain? My concern was that I'd be accused of not realising the share value and therefore giving them away would be somehow seen as some sort of tax avoidance. In my opinion, the share is currently worthless as we're not currently in profit (overall).

paddyrg · 14 October 2016 at 12:50PM

I think it's a reasonable thing to do - the other two parties will be responsible for any growth or dividend, so it's only fair to surrender your share and will lead to more goodwill in the long term :-) The alternative is that they end up diluting you to nothing anyway (or launching a new share class and only paying a dividend on that), so it's cleaner this way.

Your tax liability should be nothing if you're disposing of a worthless share in a company that isn't profitable.

shefftyke · 14 October 2016 at 1:37PM

Thanks Paddy - that was my thought. No point in holding on to the shares and a clean break would be better for all parties. I just didn't want to stuff myself at the same time!

Transferring shares - what do I need to know?

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