finance The minority shareholder trap
If you own (say) 25% of the shares in a private company which is worth (say) £1 million, what do you think will happen to those shares on your death? Michael Cutler, senior partner and head of private client work at Colemans Solicitors LLP, has the answer
You probably expect that they will go to your widow (not a sexist assumption, it just simplifies the language here), who will be able to sell them to someone for £250,000.
It doesn’t work like that.
The typical company 'mem and arts' will say that she must first offer them to your fellow shareholders, at a price to be set by the company accountant.
They don’t have to buy them. They don’t need them to run the company and, if they take money out of the company in directors’ remuneration rather than through dividends, they could even cut the income stream to the shares.
Even if they do want to do the decent thing by your widow, where are they going to find £250,000?
Under the typical 'mem and arts', if the other shareholders do not take up your
widow’s offer, she is then free to sell the shares on the open market.
But there is no market for a minority shareholding in a private company. Your shares are worthless.
Perhaps one of the other shareholders will take pity on your widow and offer her a few thousand pounds to take them off her hands. Not at all what you (or, probably, she) expected.
The only way to guarantee that your widow can sell your minority shareholding and get full value for it, is for you and the other shareholders to enter into something called a cross-option agreement.
If the job is done properly, your widow will get her £250,000 after your death with no fuss or stress, and it will be insulated from 40% inheritance tax when she dies, and for at least another generation after that.
law Sponsored Property Forum event
Former England cricket captain David Gower was the special guest at a property sector event in Henley-on-Thames on December 5.
The Thames Valley Property Forum’s First Tuesday Club Christmas lunch was sponsored by Blandy & Blandy LLP, which has offices at 12 Hart Street in the town, and surveyors Rider Levett Bucknall.
The lunch welcomed attendees representing leading names including Reading FC, Henley Town Council, TA Fisher, Lichfields, Carter Jonas, Systra, Peter Brett Associates, Kier Group and the Thames Valley Science Park, while Blandy & Blandy’s table hosted guests from the University of Reading, Savills, Barton Willmore and Samuel James.
Blandy & Blandy LLP was named ‘Property Law Firm of the Year’ at the 2017 Thames Valley Property Awards and received a regional award for conveyancing excellence at this year’s ESTAS Awards, held at London’s landmark Grosvenor House Hotel. The firm is ranked among the UK’s top Planning Law firms by Planning Magazine.
Interactive Mock Tribunal event – March 22, 2018
Following on from 2017’s ‘sell out’ event, attendees were invited to vote for their preferred topic from a choice of three options. And the results are in... This year’s mock employment tribunal, to be held at at Reading’s Green Park Conference Centre, will focus on a maternity leave/return to work scenario involving proceedings relating to a request for flexible working and alleged unlawful sex discrimination. But the voting doesn’t stop there. The event is interactive and during it attendees will be asked to vote (using a mobile portable device) on the key aspects of the case and on what the overall verdict will be.
120 guests attended the event in March 2017, with 100% rating it as “good” or “excellent”. Attendees described the mock tribunal as “very insightful”, “extremely enjoyable” and “enlightening.”
THE BUSINESS MAGAZINE – JANUARY/FEBRUARY 2018 Christmas drinks
event proves popular Blandy & Blandy LLP welcomed guests to its annual Christmas drinks at Henley-on- Thames’ Red Lion Hotel on November 30.
The firm has continued to expand in presence in the town in 2017, with several new additions to the team. Partner Luke McMath (residential property) has been joined by senior solicitors Louise Nelson (probate, tax and trusts) and Stephen Bucknill (residential property) and consultant solicitor Shashi Sachdeva (family).
Joint managing partner Tim Clark, who gave a welcome speech on the evening, said: “Thank you to everyone who joined us on a very cold evening for contributing to such a warm atmosphere. Although as a firm we were already very active in and around Henley, the town’s professional community and our existing and new clients have been very welcoming since opening our Henley office in July 2016. We look forward to continuing to develop these relationships in 2018.”
blandy.co.uk businessmag.co.uk 31
If you want to know more about this, ask your accountant, your financial adviser or your solicitor. But, if they have not already told you about this, you might be better off asking Michael Cutler, who wrote this article.
For advice or assistance:
01628 631051
colemans.co.uk
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