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The director and 100% shareholder of a failing company decided to incentivise the two managers by issuing separate classes of shares to them, with dividends being paid from future profits. The share issue was delayed until after the company recovered
I have a client who is the sole director and 100% shareholder of a limited company. For many years the company made annual profits of £100 000.
However the accounts for the past three years have shown a marked downturn in business resulting in £100 000 being lost every year since 2010. Up until now these losses have been financed by the client.
In May last year after preparing the accounts and showing another loss of £100 000 the company was insolvent and ready to close down. Not being a person to give in our client offered her two managers (Mr A and Mr B) a directorship and shares in the company (A and B shares to be issued separately to them).
The new directors agreed to take a cut in their salaries from £40 000 down to £12 000 and any profits...
