Mechanics of offering some one shares in a LTD

[jonamv8]

Hi,

Have a side project, mobile app, and I want to incentivise the app developer by offering a small share in the project. I currently own 50% and my partners own 25% each. The development falls under my control so I see it fit to offer the app developer 5-10% of my 50% to see where we can take the project.

Company has been running a year, albeit not trading. What are the mechanics of doing this in terms of companies house forms etc? We have 20 ordinary £1 shares at present.

I'm not overly concerned about voting rights etc of our new business partner but interested to hear any thoughts or advice.

Thanks

[andyb28]

I don't think you have anything to worry about as the shares are pretty much worthless at the moment. I looked to do this for one of my employees recently and it brought large tax implications to the individual.

Our accountant seemed to know everything I needed to ask and could have finalised it if required, but based on the above it was decided not to go ahead.

[jonamv8]

The shares carry no real value at present so agree that any tax liability wouldn't be an issue. It's the mechanism for transfer that I am unsure of, I presume some simple form filing with Companies House?

[dirty boy]

jonamv8 said:

The shares carry no real value at present so agree that any tax liability wouldn't be an issue. It's the mechanism for transfer that I am unsure of, I presume some simple form filing with Companies House?

Form J30.

http://www.elementalcosec.com/Form-J30.pdf

Straight forward but would always recommend you seek advice beforehand.

You should prepare minutes where the board of directors decide whether to approve the transfer, whoever they are and the company updates its statutory register, cancels current share certificates and issues the new certificates required.

Companies House will be aware of the changes when the Annual Return is completed.

[jonamv8]

cheers

[wattsm666]

Watch you don't have pre-emotion rights in your articles or shareholders agreement.

[Smelly Sox]

Pre-emption rights.

Make sure you get a shareholders agreement. Seriously.

Edited by Smelly Sox on Tuesday 13th January 22:23

[anonymous-user]

Personally, I wouldn't do what you're suggesting. The more shareholders you have the more chance of problems down the line. You are risking your currently strong position.

How about offering him some sort of contractual profit share instead? That way he's motivated, but not given any rights.

As others have said, you need to take professional advice, the cost now will be small beans compared to the trouble it might save you if the business takes off.

[andyb28]

Another way may be Share Options. i.e. shares that have no say in the business, but have value upon the sale of the business.

[sumo69]

EMI share option scheme looks good in this case...and no tax disadvantages or issues.

David

[jonamv8]

Thanks for your response.

I think I agree that share options or a defined profit share could be the best solution to incentivise the developer but retain my currently strong position

[AyBee]

Inkyfingers said:

Personally, I wouldn't do what you're suggesting. The more shareholders you have the more chance of problems down the line. You are risking your currently strong position.

How about offering him some sort of contractual profit share instead? That way he's motivated, but not given any rights.

As others have said, you need to take professional advice, the cost now will be small beans compared to the trouble it might save you if the business takes off.

Contractual profit share sounds like a much better way of achieving your aim to me.