Issue new shares

Firblog

Hi guys,

Myself and 2 friends are partners in a ltd company, 1 share each; both myself and one of the others - Mick - work fulltime for the company and are classed as self employed directors by revenue.
We believe that it would be more tax advantageous for Mick to be an employee given his personal circumstances, and would like to facilitate this.
I believe that the best way would be to issue more shares so that his shareholding falls to 10% - (below the revenue threshold (17%?) at which you're automatically deemed to be self employed)
Can anyone tell me how do we go about issuing more shares? Who would be the best person to advise on this - accountant/solicitor? Are there any tax implications - capital gains etc ?

Cheers

pedroeibar1

There are several issues involved, some of which are tax; it depends on the value of the company.. The auditor/accountant is IMO the most suitable person to go to.

antoinolachtnai

You are what Revenue calls proprietary directors, as I understand it.

If your colleague transfers half of his shareholding to you and your colleagues (which is the effective result of doing what you describe, if you are not bringing more capital to the party or not paying him for the shares) you may find yourself having to pay a tax bill for this acquisition. You do need professional advice on this, from an accountant in the first instance, but there might be legal aspects too.

Firblog

I was thinking of issuing 17 more shares, to bring total number to 20. Mick buys one, and myself and other guy buy 8 each. Say we price them at €50/€100 each, Mick then has 10%, Me 45% other guy 45%.
He had looked about gifting his share to his kids, but seemingly can't do that as they are all under 18.

antoinolachtnai

It might be fine, as long as the company is worth a thousand euros.

It all really depends on what this company does and what resources it has, as well as its relationships.

You really need to see an accountant about this to make sure everything is right.

pedronomix

Under 18s cannot be directors but they can own shares!!

dbran

All this just to save the PAYE allowance and a bit of PRSI!!

pedronomix

Well said dbran, i was just too nice to make the same remark

pedroeibar1

pedronomix wrote: »

Well said dbran, i was just too nice to make the same remark

Now that is plain funny!:D:D:D Even funnier than the OP posting here to avoid paying a few hundred quid to a professional advisor.

IMO , from reading the language in your posts OP you are walking blindfold into a minefield. Without seeing what is contained in the Articles of Assoc. of your company it is impossible to give any meaningful advice other than “Go talk to a pro.”

The articles of assoc. will set out the provisions whereby shares can be transferred or sold or issued. Hopefully there is a shareholders agreement in place that would be more specific. For example can new shares be issued by resolution or does it require an EGM?

Imagine a few years down the road and your mate Mick the minority shareholder realizes that he missed out on something and decides that you are no longer his friend and decides to bring an action for oppression. Will you have your ducks in a row?

If Mick the minority guy is also a director will he retain that role? If he resigns as such will he be at risk of being classed as a shadow director?
These are just the few easy questions......
Go talk to a professional.

Mr Clonfadda

Just be aware that if you do succeed in the person no longer being a proprietary Director, Employer PRSI of up to 10.75% will be payable by the company on all his earnings from the Company.

the_syco

pedroeibar1 wrote: »

If Mick the minority guy is also a director will he retain that role? If he resigns as such will he be at risk of being classed as a shadow director?

Another thing to look at is will he have less liability if classed as an employee? How well is your business doing? As said, talk to a pro.

Firblog

Guys believe me it's not about saving the PAYE allowance, and we are well aware of the increase in employers prsi contribution this move would bring about.

There are many advantages in being classed as an employee - as anyone who is self employed knows.

Really posted on here to get some basic do's and don'ts before going to talk to the professional that was recommended - accountant/solicitor/financial advisor

To those who have given their honest helpful advice I'd like to say thanks, you've been helpful

To those who have just posted to see their own thoughts given form on the web, really? you've nothing better to do with your time than rummaging through boards and posting on threads where you've nothing positive to contribute? You guys must be very lonely :rolleyes: