It's your company...but who owns it?
Most businesses that have been trading for more than a few years will have a bit of a history of share transactions. This might mean that shares in your company have been issued, transferred or cancelled at some point in the past. If this is the case with your business, it’s worth checking that these steps were all implemented and recorded correctly.
Failing to implement the steps correctly at the time, or poor record keeping, could mean that you can’t prove that you own 100% of the issued shares in your company. And that could cause issues if you want to sell, or if someone wants to invest money in your company.
One of the more common issues arises with share buybacks. Your company may have bought back the shares of a retiring founder, for example. If the correct documents were not signed, or were not filed with HMRC or Companies House at the time, a buyer or an investor may argue that the buyback was not effective. This creates a risk that the previous founder has a potential claim against the company.
The buyer or the investor may be unwilling to proceed with the transaction without “protection” and that protection is likely to mean that you won’t realise all the benefits you were hoping for from the transaction. You may need to set aside a material cash sum in an escrow account for a number of years. Alternatively, you might have to pay for an insurance policy for the benefit of the buyer or the investor, even if you think the risk of a claim being made by the retiring founder is small.
It’s better to check the position now and find a way to resolve any issues well before a buyer or investor becomes involved. This will make any future investment or sale go much more smoothly, and reduce the potential for these issues to delay the transaction or devalue the business. Ask the Devant team to carry out an audit of your documents and statutory books, together with the Companies House filings. If we identify any issues, we can help you deal with them quickly and efficiently, and set the records straight for the future!