Company reorganisations to realise balance sheet value for shareholders

21st January 2016

In December, HMRC published a consultation paper including proposals for new anti-avoidance legislation to prevent shareholders extracting funds from companies as capital. This coincides with the new dividend regime which starts from April 2016 which will tax dividends at 7.5%, 32.5% and 38.1%.

Capital and share reorganisation

During the lifetime of a company, it will often need to restructure the format of its capital by the issue of new shares to include new investors or new classes of shares with different class rights with different voting and dividends rights for each class of shares. It may be necessary to subdivide or consolidate shares where the nominal value needs to reflect the market or floatation value. Where capital is in excess of requirements or the balance sheet needs to be re-aligned or capital needs to be released to reserves to pay dividends to encourage investors in these cases a reduction of capital may be required.

The company may at some time need to purchase its own share from an existing shareholder to prevent the shares being sold to a third party. All these changes, however, will require documentation and may also require alteration to company’s Articles of Association to grant authority to the directors to alter the capital structure.

Individuals in certain cases individuals have been able to attract entrepreneurial relief on these transactions which has meant that they have paid 10% capital gains tax on the amounts distributed rather than income tax.  The consultation and the subsequent finance act id reviewing the treatment and whether this will be still be allowed or whether it will be caught by the new anti avoidance legislation.  Early planning prior to the commencement of the 2016/17 tax year will be essential in order to ensure you maximise the reliefs available.  If you are considering how these changes may impact on you then  contact us in order to ensure you obtain the reliefs you are entitled and enhance your the returns.

Company reorganisation

If your company proposes changes such as its name, registered office, single alternative inspection (SAIL) address, appoint or resign directors of the Company including the procedure to remove a director, the company secretarial team at Lancaster Clements Limited, can provide all related documentation and advice on what’s required under the Companies Act. You may also wish to re-register a private company as a public limited company. Lancaster Clements can provide all the documentation you will need to re-register yours to a different type of company.

To find out more about the services that we offer, visit our Services page. Alternatively, if you would like further information on the issues raised above, please contact us using our contact page.