Shares issued at par in existing company

P

PABU

Guest
I own Company A 100%.
Company A own Company B 100%

I want to break the relationship between Company A and Company B and put the shares in Company B in my own name. Company B is trading and has a net asset value of €100,000.

Will I pay tax if I transfer the shares out of Company A into my own name for a nominal amount. After all I already own the shares through Company A

What would happen if I issued new shares in Company B at par to myself and diluted Company A's shareholding. Would I pay any tax.
 
Last edited by a moderator:
There are a few tax issues here.

Firstly, if you transfer the shares to yourself at par, it is a transfer of assets and undervalue and Company A will be deemed to have paid you a dividend of that amount and you will be liable to income tax on it.

Alternatively, if you issue a raft of new shares in Company B, you are caught by section 543 of the TCA and could be liable to CGT on the transfer.
 
If you set up another company, NewCo, where you own 100% of the Share capital, and do a reorganisation, whereby you move Company B accross under the ownership of NewCo, thereby availing of share for share reorganisation exemptions from CGT for the shareholder under s. 586 and stamp duty for the company under s. 80. You can then hive up the trade from Company B to NewCo if you want and leave just a dormant company B.

There are various conditions that apply of course. You need to engage a tax specialist here, but the tax saving will more than justify the cost.

I'm not aware (off the top of my head) any way of transferring a company directly to yourself and gaining these exemptions but I stand to be corrected.
 
Thank you for your comments.

With regard to issuing new shares in Company B would I not pay CGT when I actually sell them not when I buy them. Technically I will not have made any money until then.

Company B Share Capital is 100 shares at €1. I would issue another 900 at €1.
 
PABU

By all means, use askaboutmoney to get ideas for what you want. Write out what you plan to do and then you must engage a tax specialist to review it.

Brendan
 
Why did you set up Company B as a subsidiary of Company A in the first place? Are those reasons no longer valid?

You have to consider issues other than tax issues here. Company A has a valuable assets - its shares in Company B. If you take these assets from Company A, and Company A becomes insolvent, it would probably be regarded as a fraud on the creditors.

Brendan
 
That is what I intend to do, however I thought it was simple to just issue new shares and dilute the shareholding.
 
Company A holds the property and Company B trades and rents the property. Both are solvent. The main reason is to get audit exemption for both companies as they are part of a group they need to be audited and that is costing too much.
 
Last edited by a moderator:
Hi Pabu

I would think a higher priority might be to try to get the property out of the company into your own name. This might be a good time to do it as there probably is no CGT.

Would you put Company A into liquidation? Distribute the assets to the shareholder.

You will pay some CGT and stamp duty but you will end up with a much neater structure for the longer term.

Brendan
 
If I take the building out I am left only with the shareholding in Company B. If on liquidation I then distribute Company B shares to myself I will have a capital gain to the value of Company B.
Made a big mistake at the beginning when I put the shares in Company A and not in my own name.
 
pay up a dividend from Company B to Company A to wipe out the reserves, then transfer the trade and assets of Company B to Company A. After 2 years, strike off Company B and then at least you are down to one company.
 
The problem here is that you got bad advice when you set it up. Normal setup would be to hold the premises personally and rent to the company which will trade out of the premises. I honestly can't see why it was set up the way you outlined - its just pure madness.

Nige has made a very valid point. Its definitely one option.
 
It's a very odd structure, but it's not a good idea to have just one company which is trading and which owns a property. If the company gets into financial difficulty, the property assets will be available to creditors.
At least the current structure has the advantage that if Company B becomes insolvent, it should not affect Company A.

It would also be difficult to sell the property separately from the business or viceversa.

I would probably take the CGT and stamp duty hit now to sort out the problem.
 
OK Gents thank you for your input. The consencus appears to be:

1. Sell the property from Company A and take the hit on any CGT. This does not solve my initial problem but will hopefully head off possible problems in the future.

2. Don't really have a solution to initial problem. Possible run down of Company B, and transfer of trade into Company A. Eventually declare dividend in Company B (when all assets and liabilities are materialised) and then liquidate Company B.


Shall seek tax advice now.
 
No there are more options than that if you get tax advice.

If you seek tax advice, as in my first post, there are reorganisation methods which will exempt you from CGT and the company from stamp duty.

Good luck.
 
You must log in or register to reply here.
Back
Top