What is a shareholder?

A shareholder is someone who has purchased and owns a share (or shares) in a company (this can be either a Private Limited Company or a Public Listed Company). This is a type of investment with a value which may go up or down dependant on multiple factors, the issue of shares in a company can be for numerous reasons one of these is to raise money for the company to use.

What are their rights?

Share ownership can (but not always) involve the following rights:

1. right to vote (on matters at general meetings or written resolutions)
2. rights to dividends (paid out of profits the company makes)
3. rights to distributions (if the assets of the company are divided up amongst the shareholders when the company is wound up, this allows the shareholder to receive something)
4. right to be redeemed. (This is where the company can repurchase the shares from the holder on a specified date or after an event

Are these rights always applicable?

No, a company may issue numerous classes of share with differing rights. In some cases, as part of using the shares to raise funds, companies choose to issue shares with no right to vote (or limited rights to vote) and in some cases without the right to a dividend. rights to redeeming shares are also used in specific circumstances.

Next time you are looking at your shares in a company, take a few minutes to look into what your shares allow you to do. And if you are wanting to issue shares with different rights for your company, please contact our Corporate Department to discuss. We love to help businesses grow!

The post Shares and shareholders. What are your rights? appeared first on Brindley Twist Tafft & James.

The Government has effectively created a new “class” of employee. In return for the acceptance of shares in the employer, the employee forfeits key employment rights including the right to make claims for unfair dismissal, for redundancy payments, the right to make flexible working requests etc and become somewhat second class “employees”, essentially having the rights of a worker but the obligations of an employee.

What’s the benefit? For an employer the benefits are that there will be a reduced risk of employment tribunal litigation. For the employee there is shareholding in the employer without having to “buy” the said shares in the conventional manner.

Key points to note are:

• If this is offered to an employee, they cannot accept for a period of 7 days.
• The employee must obtain independent legal advice; failure to do so will see the person become an employee but will not forfeit their rights. The Employer will be liable to pay the reasonable legal fees incurred in the provision of that advice to the employee, irrespective of whether they subsequently take up the role.
• In addition to the statement of particulars of employment under s.1 ERA, the employee must also be provided with detailed particulars which set out:
  

  o the status of employee-shareholder,

  o the rights that they will give up and

  o details of the rights, restrictions and other conditions attached to the shares.

  o whether the shares have any voting or dividend rights;

  o whether the shares can be bought back or redeemed;

  o whether the shares can be freely sold; and

  o whether certain other rights and restrictions are attached to them

• The Shares issued up to the value of £2,000 can be issued without giving rise to income tax liability, and shares issued up to £50,000 will be exempt from Capital Gains tax. These will only apply where the shares are issued in connected companies, and the HMRC has already indicated that these sums shall be “total values” in order to avoid tax avoidance schemes by issuing multiple contracts and lots of shares.

Employees cannot be dismissed or treated any less favourably in the event that they refuse to accept Employee-Shareholder status. In those circumstances existing employees cannot be forced to accept a such a change.

• Whilst employee-shareholders will forfeit some of their rights, they will still be able to claim for discrimination, unlawful deductions from wages, etc. in the normal way.

The post Employee-Shareholders; What are they and what are the requirements? appeared first on Brindley Twist Tafft & James.