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Readers' forum: Dropping the pilot

09 October 2018
Issue: 4667 / Categories: Forum & Feedback

Legislation applying to shares of retiring director.

We are advising Mr A who is retiring from his company. The other directors and shareholders are the client’s adult son Mr B and a third party Mr C. The shareholder agreement requires the exiting member to offer his shares to the remaining ones before seeking other buyers. The plan is that B and C will each buy 25% of A’s shares and once done the company will purchase the other 50%.

We have calculated what we believe to be the market value of the shares but our client wants to understand the implications if the valuation proves low. Although the capital gains tax position is straightforward questions remain about the potential impact of employment related securities legislation.

Given that the client’s son is purchasing the shares by reason of the shareholder agreement rather than because of his employment with the company ...

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