Semi Complex Share Structure

Find out more about Semi Complex Share structures and how they benefit small companies

When you set-up your LTD company you will have to decide how to have the shares set out. People tend to just do the basic as they are unaware of other options! When you search on Google you find thousands of formation companies selling you a 24hr registration for £12.99 or such like. Companies house now offer electronic company formation, so it is almost instant from a technical perspective. Hence, why there are so many companies and why it is so cheap!

Under the hood of company formation is a much deeper approach to the future thoughts on ownership and profit distribution. Shareholders are the owners and are thus due the distributable profits from the business. Owning shares doesn’t mean you have to do any work in the business it just means you are a financier of the business as you have purchased shares.

Shares carry distribution, voting and wind up rights and when you create share classes you can augment the rights on shares for these outcomes. You can have different share classes allowing for dividends to be paid to employees without them having any voting rights at your shareholder meetings. This type of structure can create tax efficient outcomes for involved parties, we can set-up or augment your current share structure to meet this goal.

When starting a business with others it is imperative to align your share structure accordingly. Just having one ordinary share each will not allow for each director to be paid different amounts of dividends. This is where we will add value as we will help you organise your structure to better meet the needs of your team. We will provide advice on share classes for an investor or a silent partner who expects different distributions but that they are specifically denoted in the company’s Articles of Association and Memorandum.

Employee share classes are a great way to incentivise your team by sharing profits via dividends without diluting your ownership rights. We can help plan this approach and set business goals alongside the structure as part of your employee’s reward package. You can further reward your staff with ordinary shares that benefit when a general dividend is paid based on the company’s objectives.

Over time you may decide to transfer ownership to your children and this can be done via share structure changes that leave you in control but able to define the dividends on their shares and remove them if you so wish with no legal recourse. You can also create a Trust and pass ownership to the Trust and thus distribute income via this structure or hold it for future generations in a tax efficient manner.

If are interested to find out more, please contact our team.