SHARE CAPITAL REDUCTION WITH DIFFERENT CLASSES OF SHARES
Posted: Tue Sep 18, 2018 5:50 pm
Father owns 100 A ordinary £1 shares and 50 B ordinary £1shares.
Son owns 50 B ordinary £1shares.
A and B shares have the same rights.
There is no share premium account and the company value is approx £500k.
The company wants to reduce its share capital by redeeming the A shares at par ie £100. Father and son both happy with this.
After the reduction father and son would own 50 B ordinary £1shares each.
The effect is that father owned 75% of the issued shares before the capital reduction and will own 50% after.
If there a tax consequence for the son as in effect the value of his B shares have just increased significantly?
Son owns 50 B ordinary £1shares.
A and B shares have the same rights.
There is no share premium account and the company value is approx £500k.
The company wants to reduce its share capital by redeeming the A shares at par ie £100. Father and son both happy with this.
After the reduction father and son would own 50 B ordinary £1shares each.
The effect is that father owned 75% of the issued shares before the capital reduction and will own 50% after.
If there a tax consequence for the son as in effect the value of his B shares have just increased significantly?