Stepping away from a company as a director…
Discussion
Help please. Parent company is 100% owned by me with partner as company secretary. Separate company is 51% owned by that same person (company secretary) and 49% owned by me. It operates out of a premises leased by my company who also established the business - £100k input. I wish to leave the business I am 49% owner of - artistic differences ! I think I have 2 options :- agree a buy out sum or stay sleeping partner and take 49% of any earnings. Caveat - partner and I are married !
You can resign as a director any time you like. Depending on the articles/any shareholder agreement the remaining director may choose not to declare dividends or create a new class of shares to distribute them to avoid you getting any.
You might want to take some tax advice on capital gains if parting with the shares, too.
You might want to take some tax advice on capital gains if parting with the shares, too.
Timetoleave said:
Help please. Parent company is 100% owned by me with partner as company secretary. Separate company is 51% owned by that same person (company secretary) and 49% owned by me. It operates out of a premises leased by my company who also established the business - £100k input. I wish to leave the business I am 49% owner of - artistic differences ! I think I have 2 options :- agree a buy out sum or stay sleeping partner and take 49% of any earnings. Caveat - partner and I are married !
That doesn’t entirely make sense. A parent company would own the subsidiary. What is it the parent of?
Depending on the size of the jointly owned company and the shareholder’s agreements etc, you might consider appointing a director to keep an eye on your interests as a major shareholder.
If you become a silent shareholder director with no role in the company, I wonder if continuing to split the dividends might look like tax avoidance to HMRC. Assuming you're not divorcing and have combined finances?
If it's not avoidance, then perhaps tax reduction is a good argument for continuing to split the dividends.
I'm not a tax expert by any means.
If it's not avoidance, then perhaps tax reduction is a good argument for continuing to split the dividends.
I'm not a tax expert by any means.
question is....is this a total break down in you and your partners relationship or that you just a can't work with each other.
If this is the start of, or possible start of the total relationship breakdown then you need to protect your control as much a possible and always assume the very worst situation,
If this is the start of, or possible start of the total relationship breakdown then you need to protect your control as much a possible and always assume the very worst situation,
Mike Oxlong said:
question is....is this a total break down in you and your partners relationship or that you just a can't work with each other.
If this is the start of, or possible start of the total relationship breakdown then you need to protect your control as much a possible and always assume the very worst situation,
Outside of complex litigation unlikely warranted by the scale of the company (e.g. unfair prejudice), not sure what control the OP has ever had/could have? Minority shareholder, assuming model articles and no shareholder agreement. If this is the start of, or possible start of the total relationship breakdown then you need to protect your control as much a possible and always assume the very worst situation,
Forester1965 said:
What's a 'silent shareholder'?
By silent I meant inactive. I believe the HMRC only allows splitting of salaries/dividends between spouses to save tax if there is a clear justification for it other than tax avoidance. In other words, the OP would need to take an active role in the company.
e.g. if wife is over 50k and husband is under 50k, dividends would be taxed at 8.75% if it goes to husband, whereas if it goes to the wife she would be taxed at 33.75%. That would be a clear motivation to continue paying the husband, but may be seen as tax evasion if the husband has 'stepped away' from the business and has no legitimate reason to be receiving dividends.
Whether this is an actual risk I have no idea, as I'm not an accountant. Just something I've come across while looking at tax in general while doing my self assessment.
Timetoleave said:
Help please. Parent company is 100% owned by me with partner as company secretary. Separate company is 51% owned by that same person (company secretary) and 49% owned by me. It operates out of a premises leased by my company who also established the business - £100k input. I wish to leave the business I am 49% owner of - artistic differences ! I think I have 2 options :- agree a buy out sum or stay sleeping partner and take 49% of any earnings. Caveat - partner and I are married !
- Do not resign as a director- If possible, have adult discussions with your partner about the way forward
- If that doesn't work, get legal advice asap
Your partner could dilute your shareholding but would be a bad move. I've seen small companies have these issues and legal 'warnings' work to move things forward in the way you want/need. You appear to be a legitimate shareholder with £100k input and that has weight.
Grrbang said:
By silent I meant inactive.
I believe the HMRC only allows splitting of salaries/dividends between spouses to save tax if there is a clear justification for it other than tax avoidance. In other words, the OP would need to take an active role in the company.
e.g. if wife is over 50k and husband is under 50k, dividends would be taxed at 8.75% if it goes to husband, whereas if it goes to the wife she would be taxed at 33.75%. That would be a clear motivation to continue paying the husband, but may be seen as tax evasion if the husband has 'stepped away' from the business and has no legitimate reason to be receiving dividends.
Whether this is an actual risk I have no idea, as I'm not an accountant. Just something I've come across while looking at tax in general while doing my self assessment.
There is no such thing as a silent shareholder as shareholders have rights under law. What you can get are "silent directors".I believe the HMRC only allows splitting of salaries/dividends between spouses to save tax if there is a clear justification for it other than tax avoidance. In other words, the OP would need to take an active role in the company.
e.g. if wife is over 50k and husband is under 50k, dividends would be taxed at 8.75% if it goes to husband, whereas if it goes to the wife she would be taxed at 33.75%. That would be a clear motivation to continue paying the husband, but may be seen as tax evasion if the husband has 'stepped away' from the business and has no legitimate reason to be receiving dividends.
Whether this is an actual risk I have no idea, as I'm not an accountant. Just something I've come across while looking at tax in general while doing my self assessment.
Many thanks, all. Spoke to accountant who made the interesting point that the “parent” company is 100% held by me, and, because the other part of the business is effectively a dormant company (not filing its own, separate accounts) in the event of any legal dispute I would be deemed to the controlling Director. The accountant also made the very good point that if ever there was such an unpleasant situation that it led to divorce none of the theoretical discussion would matter as we’d both get 50% in a normal settlement !
Edited by Timetoleave on Monday 15th April 23:34
Forester1965 said:
Seems we didn't have enough/correct information in the first place.
Also intrigued to hear of an accountant qualified to give both commercial and family legal advice.
Indeed. Speaking as an accountant, accept their judgement on the company structure, but forget the legal stuff. Engage a lawyer now, because from experience, whoever jumps first usually come out on top.Also intrigued to hear of an accountant qualified to give both commercial and family legal advice.
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