Creating shares for the family
RB writes: I recently set up a company with £100 share capital. My intention was to transfer some of the share capital to family members who also work within the business. Having looked at the company formation documents, I have found that the share capital is one share at a nominal value of £100, rather than the 100 shares at £1 each which I had expected. As only one share has been issued, should I issue more so that the family can have theirs or is it easy enough to alter the existing share structure?
As you wholly own your company, it will be quick and easy to change the existing share structure should you wish to, writes Jon Sutcliffe, partner at Kingston Smith LLP. If you wish to sub-divide the shares into 100 shares of £1 each to enable the transfer shares, then all you require is a simple resolution signed by you as the sole shareholder. A form SH02 needs to be completed and filed at Companies House. If you need help with this, your accountant or lawyer should be able to handle it or you can download a copy of the form from the Companies House website.
You might even wish to have a greater number of shares, which will give you more flexibility. If so, consider further sub-dividing the shares, e.g. into 10p or 1p shares. Alternatively, you could issue further shares, which at £100 a share would increase the company’s capital significantly. Whether you choose to do this will depend on the share structure you want relative to the amount of capital you are investing in the company.
Any gift of shares will not attract stamp duty but will require a share transfer form, although this will not need to be stamped.
HM Revenue & Customs (HMRC) often uses trust anti-avoidance legislation to attack tax savings made through income splitting as a result of gifts of shares to family members. HMRC has taken several cases to court on this, most notably the Arctic Systems case, which it lost. Provided that a gift is without condition and not wholly a right to income then you should be outside the scope of a HMRC challenge.