Sweat Equity Shareholding

Soylent_Green

Hi Folks,
I have been involved with a Ltd company for the last 2 years and over that time I had been working on a sweat equity basis, with a view to working towards an agreed percentage. The intention being that this equity would be an allocation from the founders/majority shareholders equity. As things are now; my shareholding was never vested, partly because I trust the founder. My involvement with the company has increased over the alst two years to the point where I am now the main party involved in the day to day running of the company and in return I have a written agreement from the founder that I will be transferred equity at a total amounting to 50% of his holding (there are other minority shareholders). So my questions are; what is the most tax efficient way to do this transfer?

The total shareholding allocated is circa 90,000 shares at a value of €1 each. My shareholding would amount to about 35% of that.

Also; until those shares are vested, does the written agreement from the founder/majoprity shareholder count for anything, or am I still at his mercy until shares are vested. I might add that there is no trust issue here, but I just want to look after my own intersts.

Thanks,
Soylent

gargargar

Jesus wept! Stop working until this is sorted. I have been burnt before in situations involving trusting a 'friend'. One should really keep business on a professional level.

If he transfers to you now you may have a CGT gain to the value of the shares worth. You need proper legal advice.

Seriously though don't leave it. Otherwise you won't really have anything to bargain with. Families have fallen out over inheritance money. Don't presume he will do the decent thing...

pedroeibar1

Impossible to comment taxwise on what should be done without firstly knowing the value of the enterprise. Secondly, it also is important to know what is contained in your “written agreement” and the agreement with other shareholders. Is the issue of new shares precluded? When I see “working towards” and “agreed percentage” and “I trust” I shudder. You need professional advice, sooner, not later.

dbran

Don't ever "trust" anyone in business. It is what they actually do that is important not what the say they will do in the future.

You need legal advice as to whether the legal agreement is enforcable or not. There is an income tax exposure if you are awarded the shares. However it would depend on the value of the shares which will always be difficult in a private company.

I suggest you approach them in a professional mannor and ask what the plans are for the future and see what happens. Hopefully they will do the decent thing.

Dbran

pedroeibar1

Aaaah! The decent thing! Fortunes have been made on that!! (Usually by lawyers!):D:D