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Share swap

29 September 2009
Issue: 4225 / Categories: Forum & Feedback
Two directors own a company’s shares in the ratio of 95:5. They wish to pay dividends, but on a more equitable basis. If B shares are issued would these be employment-related securities?

We act for a corporate client in which the share split of ordinary share capital is 95%/5% between two director shareholders.

These two directors have historically remunerated themselves via salaries and bonuses rather than dividends. They are now considering making use of dividends (coupled with a low salary) as an alternative remuneration strategy.

However rather than have the dividends split 95/5 they would like to even things up a bit – at the moment their remuneration packages are broadly similar.

Our question is as follows. If the company were to issue say a B share to the shareholder with 5% ordinary shares and in consideration for this B share he were to essentially pay the company in the form of his existing 5% of ordinaries (a share swap) would this transaction fall foul of the employment-related securities rules?

Query 17 478 –...

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