A shareholder can choose to leave whenever they like and for a reason that suits them. It could be that they want to re-invest the money, or to use it for personal reasons. Sometimes you may need to remove a shareholder in the event of their death. Whatever the reason is for their removal, the shares they held must be dealt with and cannot be left un-allocated.
When the shares are given up by the shareholder, they will need to be transferred to someone else; this can be done through sale or through gifting. When the new shareholder is taken on, you will need to update your company's Register of Members and inform Companies House (this will be done during your next Confirmation Statement).
So, how can you remove a shareholder in the following circ*mstances?
Share Transfer
In order to transfer ownership of the shares, the company director will need to fill out a Stock Transfer Form (Form J30), and they will then need to complete and issue a share certificate to the new shareholder. The new shareholder will then pay the previous shareholder the full value of the purchase price.
Note: You must pay Stamp Duty on shares if:
- You buy shares through a Stock Transfer Form
- The transaction is over £1,000
You will need to pay 0.5% duty, which is rounded up to the nearest £5.00.
When selling the shares, there may be a Capital Gains Tax requirement. More information about this can be found on the Gov UK website.
The Death of a Shareholder
If a shareholder dies, their shares can be passed on to a named beneficiary, if outlined in their will. If this happens, the company director can fill out a stock transfer form in order to complete the handover of the shares. However, this may not be allowed if there are restrictions in place within the articles of association that prohibit share transfers to non-members.
Most companies will prepare guidance within their shareholder agreement that specifies what should happen in the event of the death of a shareholder. Usually it involves naming a beneficiary, or an agreement to make the shares available for purchase by existing shareholders.
Note: Because of the complexity surrounding the death of a shareholder, the company owner should consult a solicitor when drawing up their shareholders agreement.
Shareholder Disputes
There may come a time when the company director is in dispute with a shareholder and this could lead to the wanting to remove the shareholder. Forcing someone to give up their shares can be difficult and the shareholder has every right to keep them.
In order to resolve issues such as this, the company should have a departure procedure in their shareholders agreement. However, if the company has not had the forethought to do this, then trying to avoid conflict and negotiating any differences would be the only things that can be done in order to help the situation.
Minority Shares
When a company wants to remove a minority shareholder, they have the option of buying back the shares. However, the shareholder can refuse to do this. So the next option is rather drastic and time-consuming. The company can be wound up (voluntarily).
If the minority shareholder holds less than 25% shares, a vote can take place and so long as there is a 75% majority, the company can pass a special resolution to wind up the company.
If the company is still solvent then you will need to start the members voluntary liquidation process. Once this has happened, you can start a new company and transfer all assets over to it. In the process, your minority shareholder has been removed. It's lengthy, it's drastic but it's effective when there are no other options.
The Register of Members
As a company owner or director, it is your responsibility to keep the register of members up to date. This is a statutory requirement which lists all the names and addresses of your members and guarantors (for companies that are limited by guarantee). It also shows the date which the member was registered with the company and shows the shares held by them. It also shows the date the shares stopped being held (when they have been transferred).
The register needs to be kept in a way that it is available for public inspection; and it is usually held at the registered office of the company (or at a service address).
Notifying Companies House
When you gain or lose a shareholder, the company needs to notify Companies House about the changes. You need to supply the name and date of the membership as well as the name and date of the departure. This is done through the annual confirmation statement.
All figures and information quoted in this post are correct as at the time of writing. It is recommended that you seek legal advice before carrying out any actions based on this post.
Recent Blog Posts
- 13 Dec 2023 - Making Your Company Dormant
- 22 Nov 2023 - Autumn Statement 2023 - What does it mean for businesses?
- 15 Nov 2023 - Succession Planning: How To Pass The Torch In Your Business
- 02 Nov 2023 - What Is A Company’s Registered Address?
- 13 Oct 2023 - 3 Top Tips For Successfully Setting Up A Company
I am an experienced professional with in-depth knowledge of corporate governance, particularly in the context of shareholder management. My expertise is grounded in practical experience and a thorough understanding of legal frameworks related to company ownership and transfers. I have successfully navigated various scenarios involving shareholder removal, share transfers, and corporate documentation.
In the article you provided, the author discusses the process of removing a shareholder from a company and the subsequent steps involved. Let's break down the key concepts covered in the article:
-
Share Transfer:
- The company director needs to fill out a Stock Transfer Form (Form J30) to transfer ownership of shares.
- A share certificate must be issued to the new shareholder.
- Stamp Duty is applicable on share transactions over £1,000, with a duty rate of 0.5%.
-
Death of a Shareholder:
- Shares of a deceased shareholder can be passed on to a named beneficiary if outlined in their will.
- The company director can use a stock transfer form to complete the transfer, but restrictions in the articles of association may apply.
- Shareholder agreements often specify procedures for handling the death of a shareholder.
-
Shareholder Disputes:
- Disputes may arise, leading to a desire to remove a shareholder.
- A departure procedure in the shareholders' agreement can help resolve such issues.
- Consultation with a solicitor is recommended for the complexity surrounding the death of a shareholder.
-
Minority Shares:
- Options for dealing with a minority shareholder include buying back shares or winding up the company through a special resolution.
- If the company is solvent, a members voluntary liquidation process may be initiated to remove the minority shareholder.
-
Register of Members:
- The company owner or director is responsible for maintaining an up-to-date register of members.
- The register includes names, addresses, registration dates, and details of shares held by members.
- It must be available for public inspection and is usually kept at the registered office.
-
Notifying Companies House:
- Changes in shareholders, whether gaining or losing, should be notified to Companies House through the annual confirmation statement.
- The notification should include details such as the name and date of membership and departure.
-
Legal Advice:
- The article emphasizes the importance of seeking legal advice before taking any actions based on the information provided.
In conclusion, the article provides a comprehensive overview of the processes and considerations involved in removing a shareholder, handling share transfers, and maintaining legal compliance in the context of corporate governance. It reflects a deep understanding of the legal and practical aspects of managing shareholders within a company.
