Having the wife as company secretary

[Jockman]

Guvernator said:

Maybe I just didn't like the thought of making my OH a company director, she already tries to direct the rest of my life

That's a fair comment

[youngsyr]

Jockman said:

youngsyr said:

That's interesting, what's the definition of a "frivolous shareholding"?

I meant the £5k divi allowance - my wife has a salary and savings income, but no dividend income.

We were advised that HMRC would not challenge 8%.

Do you know the reasoning behind that? Just seems to not serve any purpose - if my wife own's 1% or 21% of total equity, but an entire class of shares (e.g. B class) I can pay her whatever I like as a dividend completely independently of any other dividends. Her shareholding doesn't have any impact on it?

[Jockman]

youngsyr said:

Jockman said:

youngsyr said:

That's interesting, what's the definition of a "frivolous shareholding"?

I meant the £5k divi allowance - my wife has a salary and savings income, but no dividend income.

We were advised that HMRC would not challenge 8%.

Do you know the reasoning behind that? Just seems to not serve any purpose - if my wife own's 1% or 21% of total equity, but an entire class of shares (e.g. B class) I can pay her whatever I like as a dividend completely independently of any other dividends. Her shareholding doesn't have any impact on it?

Make B class shares 8% ?? Then pay her what you like, yes.

Perhaps the reasoning by HMRC was to help protect minority voting rights? I would need to look through emails from 2011 to see.

Also, make the dividend payments irregular. Try to avoid set patterns.

[DonkeyApple]

I believe that what is best avoided today re alphabet shares is not giving them voting rights.

[youngsyr]

DonkeyApple said:

I believe that what is best avoided today re alphabet shares is not giving them voting rights.

But that's easily avoided too.

Let's say I own 99 Class A shares at £1 nominal value each and at the time of issue they are the only shares in existence, I therefore own 100% of the company.

After a year I issue 1 Class B share at £1 nominal value to my wife. It has pari passu rights to the Class A shares. My wife owns the only Class B share in existence.

Now let's say the company makes £100k profit in the year.

There is absolutely nothing to stop me declaring a £50k dividend for each share class, meaning my wife gets £50k and I get £50k, despite me owning 99% of the company and my wife only owning 1%.

[DonkeyApple]

youngsyr said:

DonkeyApple said:

I believe that what is best avoided today re alphabet shares is not giving them voting rights.

But that's easily avoided too.

Let's say I own 99 Class A shares at £1 nominal value each and at the time of issue they are the only shares in existence, I therefore own 100% of the company.

After a year I issue 1 Class B share at £1 nominal value to my wife. It has pari passu rights to the Class A shares. My wife owns the only Class B share in existence.

Now let's say the company makes £100k profit in the year.

There is absolutely nothing to stop me declaring a £50k dividend for each share class, meaning my wife gets £50k and I get £50k, despite me owning 99% of the company and my wife only owning 1%.

Yes but what's that to do with voting rights of share types?

I was advised recently to include voting rights in the issue of alphabet shares as it was something the HMRC were focusing on.

[youngsyr]

DonkeyApple said:

youngsyr said:

DonkeyApple said:

I believe that what is best avoided today re alphabet shares is not giving them voting rights.

But that's easily avoided too.

Let's say I own 99 Class A shares at £1 nominal value each and at the time of issue they are the only shares in existence, I therefore own 100% of the company.

After a year I issue 1 Class B share at £1 nominal value to my wife. It has pari passu rights to the Class A shares. My wife owns the only Class B share in existence.

Now let's say the company makes £100k profit in the year.

There is absolutely nothing to stop me declaring a £50k dividend for each share class, meaning my wife gets £50k and I get £50k, despite me owning 99% of the company and my wife only owning 1%.

Yes but what's that to do with voting rights of share types?

I was advised recently to include voting rights in the issue of alphabet shares as it was something the HMRC were focusing on.

Sorry wasn't particularly clear - you can issue a negligible amount of shares to the party whose vote you want to negate, but still pay them equally to the controlling shareholder, by giving the "voteless party" B shares. Doesn't have to be 1%, could be 0.00001% meaning that although technically they have a vote, it's worthless.

[DonkeyApple]

youngsyr said:

DonkeyApple said:

youngsyr said:

DonkeyApple said:

I believe that what is best avoided today re alphabet shares is not giving them voting rights.

But that's easily avoided too.

Let's say I own 99 Class A shares at £1 nominal value each and at the time of issue they are the only shares in existence, I therefore own 100% of the company.

After a year I issue 1 Class B share at £1 nominal value to my wife. It has pari passu rights to the Class A shares. My wife owns the only Class B share in existence.

Now let's say the company makes £100k profit in the year.

There is absolutely nothing to stop me declaring a £50k dividend for each share class, meaning my wife gets £50k and I get £50k, despite me owning 99% of the company and my wife only owning 1%.

Yes but what's that to do with voting rights of share types?

I was advised recently to include voting rights in the issue of alphabet shares as it was something the HMRC were focusing on.

Sorry wasn't particularly clear - you can issue a negligible amount of shares to the party whose vote you want to negate, but still pay them equally to the controlling shareholder, by giving the "voteless party" B shares. Doesn't have to be 1%, could be 0.00001% meaning that although they have a vote, it's worthless.

Yes, absolutely. It's ultimately an irrelevance but I was guided that the practice of issuing alphabet shares without any voting rights should be avoided going forward.

[Jockman]

DonkeyApple said:

...but I was guided that the practice of issuing alphabet shares without any voting rights should be avoided going forward.

Correct. We stick to the 8% with full voting rights.

As an aside, always good to ensure your Articles of Association are in line with the Shareholders Agreement. Most are not but it is straightforward to amend.