Changing owners % in Private Company

Hi All

After weeks of discussion with my accountants I thought I might post the sitation here and see if there are any fresh ideas we have failed to think of.

In summary -

Private family company with shareholders. Shareholders A and B have 45 shares each whilst C has 10 shares. A & B wish for C to now have a 50% holding in the company. A & B have no desire to receive any monetray benefit from the re-structure.

We have thought of the following options...

1. A & B each gift 20 shares to C's DT at market value. Main problem - CGT bcomes payable.

2. Company issues 80 new shares, which C purchases. Main problem - C has to pay mkt value for the shares. If DT borrows to purchase, the tax deductions on the loan are trapped unless the DT earns additional income.

I apologise if that is nowhere near enough info for anyone to help with suggestions. We have to move on it fairly quick, plus I value all your time so i didn't want people to get bogged down in my problems.

Cheers

Paul

 

This may sound like I know what I am doing ... but I assure you that I do not ! They are just wild and ill thought out speculation.

The problem is that you want to transfer an interest in the company or its underlying business to another entity without incurring CGT - for which the law is designed to prevent.

A few ideas from left field:

1) Does C provide sevices to the business ? Make C an employee & participate in an employee share scheme - issue shares to be held on trust until a 'reasonable' amount of services have been provided to avoid a value shift.

2) Does the company owe money to C ? Convert debt to equity.

3) Does C participate in the business or can he/she contribute services or assets ? Form a joint venture or partnership with C (or C's trust). A JV can share product without sharing liability.

This could keep your taxation planner busy for a while ...

It will probably give them a good laugh ... at your expense since you are paying for their time.

Cheers,

Rob

 

Thanks for your suggestions Rob - much appreciated. C is employed by the company, currently as managing director. I'll let you know my advisers comments!

Cheers

Paul

 

Hi Banzai,

Maybe even company options (80 options)??? Exercise price can be $1...
There is no selling of shares...

PS Check with your tax adviser and accountant before doing anything!