Well, its been one hell of a week for weirdy account situations walking through my door!!
Here is today's offering..
A company has set themselves up - owner director - and decided to put down 15,000 £1 shares. A year later the annual return is completed by the director, and he shows that he is the owner of the shares..of course this needs to be more like 1 x £1 share...
Any ideas on how I can fly this in the March 2013 accounts and how I should fix this?
I think you may also want to check the mem of arts to see what is issued as it may be that 15000 is authorised but less have been issued. I'm assuming they have not been paid up but if they have been there might be tax implications if he wants to take the money back.
The NEWINC package from companies house shows 15000 shares in the "statement of capital", and then "initial shareholdings" in the directors name for the full 15000 - NIL paid NIL unpaid
There is a final page titled COMPANY HAVING SHARE CAPITAL and underneath that is says "Memorandum of Association of X Ltd". Its simply says that each subscriber to this memorandum wishes to form a company under the Companies Act 2006 and agrees to become a member of the company and to take at least one share
Then it shows the directors name and that he gave electronic authorisation. That's it. I am thinking he has set the company up online direct with company's house, and has no real Mem's or Arts.
So would this mean 15000 shares are issued to him but unpaid?
How do I present this in the accounts? And how do I change it to 1 share?
The client basically has no clue what he has done or why... the business only has a Paypal account, and he hasn't put any money into it.
Argh! Why me! I've had about 6 enquiries this week and all have had some pain in the !*% twist!
Possibly it's 15000 authorised, nil issued - which I think cannot be, or it's 15000 authorised and issued - nil paid, which I think could be more likely, or it's 15000 authorised, 1 (or some other number) issued nil paid. (I take it he hasn't paid anything!) I think the last is what was intended; nothing wrong with a share which has been issued (or 15000 of them) being wholly unpaid - the debt becomes a company asset. That's how you should show it.
Check the minutes of the first Shareholders' Meeting and the first Director's Meeting - the issue of shares would have been covered then. What? There are no minutes ... the Director had better get them written up, then, hadn't he?
It's a whole other question about reducing capital. (Do you mean reduce the authorised capital or the number of shares issued?) Let's wait and see what the original minutes said before we go there.
What would the minutes need to say in this instance?
If I leave 15000 as authorised, which as you say, wont cause an issue... what do I need to do to reduce his shareholding down to 1 share? Do I just change it on the next annual return? Is there any other form that needs to be filled in?
Thinking about 31 March 2013 accounts, if the shares are wholly unpaid, would that debt be on his directors account and so make him overdrawn?
So sorry for all the questions. Company Secretarial is not something I have had a massive amount of experience in. :(
this is the best I could find, but like you this is not an area I would excel in!
Circumstances in which a company may reduce its share capital.
(1)
A limited company having a share capital may reduce its share capital.
(a)
in the case of a private company limited by shares, by special resolution supported by a solvency statement (see sections 642 to 644);
.
(b)
in any case, by special resolution confirmed by the court (see sections 645 to 651).
I think all those section numbers relate to The Companies Act 2006, so if you google 'companies act 2006, section 242' you should come up with something that is probably just as confusing. If you get this sorted, charge the client a hefty price because this is pretty specialist work that a tax lawyer would rip him off for I would imagine!
PS, on a slightly different matter, I wouldn't set him up with 1 share, I always set up 100 shares so it gives flexibility if he wants to transfer any/sell any. This wasn't any kind of forethought but I had a couple of clients with just one share and they wanted to give half to their partners etc and its easier having a hundred to play with than issuing more shares!
What a mare! I think reducing the share capital is not an option. Leaving 15000 shares as authorised wont cause any issue. Its the directors shareholding disclosure that is the problem. Its saying 15000 has been issued to him. He cant pay for them.
The only things that have been filed at C House are the NEWINC and the 1st year annual return.
If I amend the annual return to show only 100 shares held by the director (good point you make young grasshopper!), will there be any further implications? I am hoping that an amended AR would mean I can show only 100 shares in the March 2013 accounts?
I'll come back to you on this one. I promised my better half to do some gardening today, so that must come first ... Personally, I think golden leaves on green grass make a wonderful autumn display ... [sigh] Then City's playing this afternoon ... priorities always get in the way huh?
Rob is on the right track, but I think, as the original resolutions still need to be prepared, where the allotment and issue of shares would have been dealt with in the first place, this would be the way to look initially.
I need to check how to correct annual returns or if I should suggest you get to the situation shown by the AR and then cancel the shares afterwards (all before 31/3 of course!).
If you have the same weather as we have here (crisp, fresh and sunshine), I would say garden wins every times!
The first annual return was dated 12th March 2013 and submitted 31 May 2013. Perhaps that gives us some play to correct the situation between 13th and 31st March 2013?? Then the accounts will be right and we can show the new correct figures on the AR dated 12th March 2014??
Really sorry for my total dimness on this. I've never dealt with anything like this before. Literally need a word for word breakdown of how to proceed, what to write, etc
-- Edited by FoxAccountancyServices on Saturday 30th of November 2013 12:19:06 PM
Seems like he has made a mistake when setting the company up and issued 15k £1 ordinary shares.
I would just amend the next annual return to the correct amount and show what should have been issued in the 2013 accounts.
Technically not the correct way of doing it but at the end of the day is an owner/managed business so no one is going to bother about it.
I have clients having set companies up themselves and have £1 issued shares but in the shareholder section has them valued at £0.01 each. This is obviously wrong but as long as you show it correctly in the accounts and amend the next annual return then no one is ever going to bother.
Apologies for leaving you all with this one.. I am having computer issues.
Iain - you are a diamond, I will reply to your PM now
Mark - I have to admit, I have seen some clangers go through the accounts un-noticed. One company submitted accounts with no shares, and not an eyelid was batted!
Bear with me if I disappear again - got to make sure everything has properly backed up and then reformat my machine.. wah!!
Hello
Sounds like a Monday from hell - hope you get it sorted and your day gets better.
One of mine submitted their own Annual return and attempted to transfer shares into a Holding company and managed to bobse it up - Im afraid I passed that one on to the Accountant to sort. Had a search to find the email response he sent,but Ive only been copied in to half of it! Sorry cant help.
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Finally have the laptop back to normal. Got up at 4am on Monday and was messing about til 1am! Iain has been unbelievably helpful with a PM of guidance. Still debating whether best to pass that particular work on. Like Mark says, his way would probably go unnoticed but not sure I want to put myself forward for possible comeback... not after the week I've had so far!!
Now I know you are in Stockport, I may just have to tap you up for a G&T to relieve the stress ;0)
-- Edited by FoxAccountancyServices on Friday 6th of December 2013 12:30:59 AM
Now I know you are in Stockport, I may just have to tap you up for a G&T to relieve the stress ;0)
OMG thats horrendous! Im fast coming to the opinion - dump and run with the 'orrible ones,although not so practical for the old income earning. Any time Mrs!!
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
There seems to be conflicting advice on whether the unpaid shares should go to DLA or other debtors. Does anyone know the definitive answer, by any chance?
As a solution, could the unpaid shares be considered as "uncalled" instead? I don't see a code for uncalled share capital on the accounts production software, and I have read that uncalled is only disclosed as a note, and only called up shares go on the BS - but again conflicting reading ??
I think "uncalled" capital is where the Company only wants part of the share's value to be paid (the "called-up" part). This is different from a share that has been issued for value but the payment has not yet been received: unpaid.
In the first instance, the uncalled capital is a contingent liability for the shareholder, because he can be asked to pay the balance at any time, but until it does, he owes nothing more*. In the second, the shareholder is indebted to the Company until he pays for his share.
However, the descriptions used are not technical terms and are freely interchangeable, which adds to the confusion.
Iain
* It occurs to me for the first time to wonder whether uncalled shares should be listed as a contingent liability in the accounts of a shareholder that is a company. Anybody have an idea?
It is possible to re-present certain documents (including an annual return) where the original contains an error under a procedure known as "second filing". This involves resubmitting a corrected document plus another form (RP04) to indicate that it is a replacement. The original document will remain on the public record.
There is a similar procedure where the document has not been "properly delivered" (i.e., it has not been completed in the correct manner)
