New ltd co shareholder rights

[Trailhead]

Hi all

My brother and I are floating the idea of setting up a new ltd co to hold two rental properties.

We are minded to go in at circa 25/75 in terms of share capital.

Given the potential for disputes in the future or issues at death with new spouses etc - does a 25% holding give sufficient protection in the future to the 25% shareholder?

Would 26% 74% be better? Or does it really need to be 50/50 to protect all involved?

Thanks all

[anonymous-user]

To some extent it depends on the shareholder agreement and other documents drafted at the time of incorporation and subsequently.

Given the value of the assets and liabilities of the company, a couple of hours with a solicitor to advise on the necessary agreements might be money well spent

[Ultraviolet]

You could set up two share classes and give 3 X the voting rights to the class which represented the smaller (25%) portion of share capital.. Lawyer can advise on whether this will achieve the outcome you are looking for...

Cheers,

UV

[dalenorth]

You could set up a shareholder protection Policy to stop the issues with spouses etc.

[Alpinestars]

26%.

Certain things can only be done by a company on the passing of a special resolution - which requires at least 75% of those voting to pass the resolution. You are therefore better holding 26% of the voting shares rather than 25%.

[Trailhead]

Thanks all.

Re the shareholders agreement, can a majority shareholder subsequently change or remove the agreement?

And how easy are they to enforce if directors or shareholders break them?

[Jockman]

Alpinestars said:

26%.

Certain things can only be done by a company on the passing of a special resolution - which requires at least 75% of those voting to pass the resolution. You are therefore better holding 26% of the voting shares rather than 25%.

Good advice, as ever.

[Jockman]

Trailhead said:

And how easy are they to enforce if directors or shareholders break them?

Directors simply run the Company on behalf of the Shareholders. If Shareholders break the provisions then legals can be engaged.

[Alpinestars]

Jockman said:

Alpinestars said:

26%.

Certain things can only be done by a company on the passing of a special resolution - which requires at least 75% of those voting to pass the resolution. You are therefore better holding 26% of the voting shares rather than 25%.

Good advice, as ever.

[akirk]

technically one share more than 25% - so depends on how you split your shares / how many shares...

http://www.shareholderrights.co.uk/RightsOfAShareH...
http://www.murrellassociates.co.uk/news/five-ten-f...

both useful guides

2006 companies act:
http://www.legislation.gov.uk/ukpga/2006/46/pdfs/u...

[Alpinestars]

akirk said:

technically one share more than 25% - so depends on how you split your shares / how many shares...

http://www.shareholderrights.co.uk/RightsOfAShareH...
http://www.murrellassociates.co.uk/news/five-ten-f...

both useful guides

2006 companies act:
http://www.legislation.gov.uk/ukpga/2006/46/pdfs/u...

Correct, ie, anything which doesn't give the majority AT LEAST 75%.

[akirk]

Alpinestars said:

Correct, ie, anything which doesn't give the majority AT LEAST 75%.

exactly - though you are right to promote 26% as lots of people setting up companies can get it wrong - maths isn't always their strong point, so 26% is an easier guide...