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Reduced shareholding

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03 January 2012

Issue: 4335 / Categories: Forum & Feedback

A limited company has four shareholders who each own 25% of the shares. One of the shareholders has agreed to reduce his interest to 4%. This was to have been done by the issue of shares followed by a repurchase

Company X has four subscriber shareholder/directors (A B C and D) each holding one £1 share. When the company was formed all shareholders were equally involved in the business.

Now however A spends little time in the business and the others have agreed that A should reduce his shareholding to 4% of the company.

To achieve this it is proposed that there should be a bonus issue of shares so that each shareholder receives a further 31 shares. The share capital will then be 128 shares.

The company will then repurchase 28 shares from A leaving him with four shares and B C and D with 32 shares each.

The repurchase will be for £1 which is likely to fail the requirements for capital treatment. If so a cursory glance may suggest that as there is no excess over...

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Reduced shareholding

© Copyright LexisNexis 2024. All rights reserved.

03 January 2012

A limited company has four shareholders who each own 25% of the shares. One of the shareholders has agreed to reduce his interest to 4%. This was to have been done by the issue of shares followed by a repurchase

Company X has four subscriber shareholder/directors (A B C and D) each holding one £1 share. When the company was formed all shareholders were equally involved in the business.

Now however A spends little time in the business and the others have agreed that A should reduce his shareholding to 4% of the company.

To achieve this it is proposed that there should be a bonus issue of shares so that each shareholder receives a further 31 shares. The share capital will then be 128 shares.

The company will then repurchase 28 shares from A leaving him with four shares and B C and D with 32 shares each.

The repurchase will be for £1 which is likely to fail the requirements for capital treatment. If so a cursory glance may suggest that as there is no excess over...

If you or your firm subscribes to Taxation.co.uk, please click the login box below:

If you are not a subscriber but are a registered user or have a free trial, please enter your details in the following boxes:

Subscribe Now...

Alternatively, you can register free of charge to read a limited amount of subscriber content per month.

Once you have registered, you will receive an email directing you back to read this item in full.

Please reach out to customer services at +44 (0) 330 161 1234 or 'customer.services@lexisnexis.co.uk' for further assistance.

Issue:

4335

Categories: Forum & Feedback [1]

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