Shareholders Agreements
A properly constructed shareholders agreement is a critical part of any business with more than one shareholder and for any investor. Shareholders Agreements can serve a wide variety of purposes and can give shareholders rights which would be unenforceable if inserted in the Articles of Association, such as a right of veto, or personal rights such as a right to be appointed as a professional adviser to the company. Unlike Articles of Association, Shareholders Agreements are not subject to public scrutiny and will preserve confidentiality. A well drafted agreement will provide an orderly way to transfer shares in the business and help to keep the business running smoothly in the face of events such as the death, disability or retirement of a shareholder. Investors who do not acquire control of the company should require a shareholders agreement as a condition of funding, protecting their investment by various means which could include limiting the ability of managers to sell their shares to outsiders or to acquire shares being disposed of; rights to veto certain important financial decisions made by directors; and requirements that the management agree to vote so the investor will be ensured a seat on the board of directors.
Entrepreneurs' Relief
After business leaders voiced their objections to the abolition of taper relief, the Chancellor introduced a new Entrepreneurs’ Relief (ER). ER may be available for disposals, reorganisations and relevant transactions taking place on or after 6 April 2008.
The main effects of this relief are:
* the first £1m of gains qualifying for relief will be charged at an effective rate of 10%;
* gains in excess of £1m will be charged at 18%;
* an individual will be able to make more than one claim for relief, up to a lifetime total of £1m of gains.
Professional bodies are calling for amendment to the draft legislation as it makes its way through the Parliamentary system. One of the issues identified with the new rules is the problem of “associated disposals” and whether or not these qualify for relief. An example would be the situation where an individual wishes to dispose of the business premises which he owns personally and lets to the business.
Please do talk to us if you are planning to dispose of your business, as planning is best undertaken early.
Wealth Creation Specialist - September 2008 Newsletter
