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Selling your shares back to your company: 16 FAQs
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- Why might I want to sell shares back to the company, and why might the company want to buy its own shares?
- Is a company allowed to purchase its own shares?
- Who can authorise the purchase by the company?
- What shareholder resolutions are required?
- Do we need approval from creditors for the company to purchase its own shares?
- How is the price determined?
- Can the company buy back shares when it has 'insider' information?
- Does the company need to have enough retained profits to cover the purchase price?
- Do we need to notify anyone if the company buys back shares?
- What are the tax consequences for me if I sell my shares back to the company?
- What are the tax consequences for the company if it buys back my shares?
- What happens to the shares once the company has purchased them?
- How does the company cancel the shares it has bought back?
- Is there any advantage to holding treasury shares?
- Do treasury shares have the same rights as other shares?
- What are the rules for redeemable shares?
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If I sell my full share interest back to the company and claim entrepeneurs relief, am I allowed to be employed in a lesser capacity on reduced hours ? or do I have to sever all ties in total?
Paul, I'm not an expert on Entrepreneur's relief, but be aware that ER isn't available on every share buy-back.
The default tax position is that the payment from the company to the shareholder on a buy-back will be treated by HM Revenue and Customs as income (as if the company were paying the shareholder a dividend). If that happens then, as I understand it, Entrepreneur's Relief is not available.
However, if certain conditions apply, the payment is ttreated as a capital payment (as if the company were a third party buying the shares, so you make a capital gain on the sale). If this applies then, as I understand it, Entrepreneur's Relief IS available.
Main conditions are that the company must be an unquoted trading company, the purchase must be made wholly or mainly for the purpose of benefiting a trade carried on by the company and the purchase must not form part of a scheme or arrangement one of the main purposes of which is either to enable the seller to participate in the profits of the company without receiving a dividend or the avoidance of tax
You can apply to HM Revenue and Customs to get advance clearance on how you want the payment from the company to the shareholder for their shares to be taxed - as income or as capital gain, so you know what your Entrepreneur's Relief position will be before you carry out the buy-back. See s 219 ICTA 1988 and search the HMRC website.
Your main question about continuing employment is outside my area but I can't find anything in the rules that would seem to stop you remaining employed - my hunch is that you therefore can...but please don't rely on me. Is anyone else able to comment on that, please?
Due to divorce, I am selling my 50% shares to my ex with whom we built the company together. It is a small ltd company. How do I know how much to ask for.?
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