LTC entity

[JABlog]

I have a current LTC with just 2 shareholders.

If I want to change my shareholding , do I have to go through a process or is it as simple as doing it online in the companies register.


Thanks

[Wayne]

I would have said that the process is to do it online.
Probably create a company minute to that effect (a record of why) - the other party could say you 'stole' their shareholding.
Might be tax implications - talk to your accountant.

[Anthonyacat]

Definitely talk to your accountant. There will almost certainly be tax implications through deemed disposal of LTC assets.

But in terms of actually changing shareholding, there's no 'LTC Re-election' form like there is (or used to be? haven't used it recently) for QCs. It stays an LTC as long as the new shareholding still qualifies.

[sidinz]

Ross said a while back that it involved more - a document that needs to be signed.

[Wayne]

Ross said a while back that it involved more - a document that needs to be signed.

As I suggested it needs something to document the reason and acceptance of the shareholder being dropped.
Lomu's wife tried that after he died - just go on-line and move his shares to her.
Didn't go so well for her.

After all, the shares belong to someone else. They have a value and just because you have access on-line doesn't mean you can 'take' them.

[JABlog]

The shareholder ownership name wont change, just the percentage of shares , as long as I document it, wondering if IR needs to be notified

[Anthonyacat]

Yes, a minute is required. Sorry, thought that was clear from Wayne's message. No further documentation is required, like the old QC Re-election form.

Regardless of whether shareholders change absolutely or just relative share numbers, there is still likely to be a deemed disposal of LTC assets, which you or your accountant will have to deal with.

As for notifying the IRD, you don't need to do this directly. Normal companies require a Shareholder Continuity box to be filled in on the IR4 at the end of the year, which effectively notifies them that shareholding has changed. Pretty sure LTCs do as well, but it's been a few months since I filled one in.

[sidinz]

Regardless of whether shareholders change absolutely or just relative share numbers, there is still likely to be a deemed disposal of LTC assets, which you or your accountant will have to deal with.

So would this trigger the brightline test? So if I bought a property in an LTC, and within two years transferred the shares from me personally to a Trust (of which I was the main beneficiary) would that trigger tax to be paid?

[Anthonyacat]

So would this trigger the brightline test? So if I bought a property in an LTC, and within two years transferred the shares from me personally to a Trust (of which I was the main beneficiary) would that trigger tax to be paid?

This is not an issue I've come up against yet, and as always 'it depends' - but I'm leaning towards a yes.

Deemed disposals are a big fishhook in LTCs. Luckily, most people don't need to change the shareholding mix often.

[Nick G]

what about for loan docs?

[sidinz]

what about for loan docs?

In my case, with only one shareholder and planning to transfer into my Trust, I'm not anticipating any issues with needing to change loans.
In JABlog's case, the names are staying the same, so probably no need to change either, as probably already under both names.

[Ivan McIntosh]

Adding to the advice of this forum, and assuming the new share structure is LTC compliant and doesn't create tax issues, there are also some Companies Act formalities when transferring shares, which is what you're effectively doing.

Firstly, if there are more shareholders than the two that are giving and receiving shares, the non-involved shareholders will likely have pre-emptive rights that need to be waived.

Secondly, as was earlier referred to the company itself will need to minute acceptance of the transfer, and record the new shareholding in its Share Register. You all have one, right? (Rhetorical question: most people don't bother even though they are legally required to). If a director is one of the transferor/transferee they need to record their interest in the transaction and have the minute approved by the shareholder.

Thirdly there should be a share transfer document that sets out the number of shares being transferred and the consideration paid for those shares, and which is signed by both shareholders. if the shares are being gifted, it should be recorded with a deed of gift that is referred to in the share transfer.

[sidinz]

Thirdly there should be a share transfer document that sets out the number of shares being transferred and the consideration paid for those shares, and which is signed by both shareholders.

Is there a pro-forma somewhere or this document?

[Anthonyacat]

Is there a pro-forma somewhere or this document?

Craigs Investments has one available online. Though I must admit, while I do keep the legally required share registers for all the companies I act for, I've never used the share transfer form - figured the company minute was enough.

[Ivan McIntosh]

Problem with a company minute is that it is the directors resolving or noting something...not the transferor/transferee unless they are the exact same people, which sometimes will be the case.