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The shareholder of a private company wishes to effect a reorganisation of the shares in a company owned by himself and his wife before transferring shares to his sons. The sons will then sell shares to trusts in favour of their children
Our client Mr A is 65 and wishes to transfer equity in his company to his three sons who are employed by the business. The company is successful cash-rich and has a balance sheet value of more than £3.5m.
The share capital consists of 10 000 £1 ordinary shares owned by our client and 10 000 £1 B shares owned by his wife Mrs A. Mrs A’s shares are entitled to dividends only.
The proposal is that Mr A will issue a further 180 000 £1 ordinary shares to himself. Subsequently the 10 000 B shares owned by his wife will be enfranchised to full ordinary shares giving the company an ordinary share capital of £200 000. He will then give each of his three sons 19 000 shares and will complete a holdover election in respect of capital gains tax.
As long as...
