Readers’ forum: Shipbuilding

Shippy Ltd a company in the ship-building industry is owned and managed by my client a sole director and shareholder who is expecting to sign some large contracts over the next year. The company has 15 employees who are paid salaries through PAYE. The director is looking to acknowledge their contribution as well as retain and motivate them.

Instead of promising bonuses (to be paid through PAYE) based on profits he is considering an alternative proposal of allotting one share (beyond the 499 he already owns) to an employee-owned NewCo. This will be of a separate class of shares with no rights other than a right to a dividend from Shippy.

Employees would subscribe to shares in NewCo and an agreement drafted to agree a mechanism for payments to be made to NewCo based on Shippy’s performance distributed as dividends by NewCo to the...