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Shares in new limited company

  • 11-08-2010 4:15pm
    #1
    Jenny Gleeson
    Closed Accounts Posts: 3 ✭


    Hello all,

    I would like to enquire about my options for the issuing of shares to me by my employer.
    I have been offered shares in a small, newly incorporated limited company.
    There are 500,000 Authorised Shares at €1 each and 100 Issued Shares @ €1 each (these issued shares are split among three directors in a ratio of 43:43:14)

    If the company offers me eg 10 Shares, what is my best course of action? To buy into the company for the 10 Shares at €1 each or to have the company dilute the value of the current shares and end up with 110 issued shares & 500,000 Authorised shares in total @ €0.909 each, with 10 of these shares being mine.

    I know this is small money at the moment but the planned growth of the company could mean a much larger monetary amount via dividends/sale of the company etc in the long run.

    I would like the best option that minimises taxation and hassle of forms to be filled etc.

    Thanks
    Jenny


Comments

  • #2
    Ideo
    Registered Users, Registered Users 2 Posts: 1,618 ✭✭✭Ideo


    Can you explain this again? Its difficult to understand.
    Jenny Gleeson wrote: »
    If the company offers me eg 10 Shares, what is my best course of action? To buy into the company for the 10 Shares at €1 each or to have the company dilute the value of the current shares and end up with 110 issued shares & 500,000 Authorised shares in total @ €0.909 each, with 10 of these shares being mine.

    I dont think the company is going to dilute the value of the existing shares in any case. You will be issues 10 share so the total shareholding after acquisition will be

    110 = 43:43:14:10 each with a value of €1 each.

    Re tax, you're purchasing €10 of shares? I don't think you'll pay any tax. Are you becoming a director of the comp?


  • #3
    Jenny Gleeson
    Closed Accounts Posts: 3 ✭Jenny Gleeson


    Hi,

    apologies if I am not explaining myself well.
    No - I will not be a director.
    I know the investment amount is only small - it is more the % of the shares that I am interested in.
    The company may be sold in the future and this is where the percentage will matter.

    I suppose ultimately I am asking about the procedure for obtaining shares in a limited company. If the directors allow me to purchase the 10 shares what forms etc have to be filled out is there charges to the company for this? Do I have to alert revenue? (again I understand its only €10-but i want to have all bases covered!),

    Many thanks for your assistance
    Jenny:)


  • #4
    NCG
    Registered Users, Registered Users 2 Posts: 80 ✭✭NCG


    Jenny,

    You need to clarify if you are purchasing the shares off the directors or the company. If the directors, there will still be 100 issued shares but they will be transferring some of theirs to you. If the company, there will now be 110 issued shares. The nominal share value of €1.00 will not change.

    If the shares are transferred (from other directors), a Stock Transfer Form should be completed. This no longer needs to be sent to Revenue as the transaction is exempt from Stamp Duty. It should be held by the company secretary. If new shares are issued, the issue is simply recorded in the company register. In either case you should be issued with a share certificate and the transaction should be recorded in the company's next annual return to the CRO. Many small companies don't adhere to these formalities but it is important if there are likely to be any issues in the future.

    You would only have a taxation issue (at this stage) if you were receiving the shares at less than market value (you would be liable for CAT). You say it is a new company though so assuming it has not traded yet, and has no assets or liabilities, it probably has zero value.

    You should record the purchase of the shares in the "Chargeable Assets" section of your annual income tax return (if you file one).

    It is always important to have a shareholders' agreement, but particularly so in a case like yours, where you have minority shareholders, non-director shareholders etc. Otherwise there is little control over sale of shares, inheritances, valuation on buy-backs, setting of salaries, dividend policy, etc. You seem to think this company has potential - if so, it would be well advised to invest in a little professional advice in the beginning.
    Jenny Gleeson wrote: »
    Hi,

    apologies if I am not explaining myself well.
    No - I will not be a director.
    I know the investment amount is only small - it is more the % of the shares that I am interested in.
    The company may be sold in the future and this is where the percentage will matter.

    I suppose ultimately I am asking about the procedure for obtaining shares in a limited company. If the directors allow me to purchase the 10 shares what forms etc have to be filled out is there charges to the company for this? Do I have to alert revenue? (again I understand its only €10-but i want to have all bases covered!),

    Many thanks for your assistance
    Jenny:)


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