A shareholder may want to gift shares at some point, most typically to a family member. This means the shareholder transfers shares to another person for nil value.
Transfer process
As with a share transfer for value, a gift of shares will require a stock transfer form. As the gift is by nature a transfer for nil value, the transfer will not create a stamp duty liability. Once the gift is completed, the original shareholder’s share certificate in respect of the gifted shares will be cancelled, and a new share certificate will be issued to the recipient. The company will also need to update its statutory books.
It is important to check the company’s articles of association (and any other documents such as a shareholders’ agreement) before making such a gift, as the transfer must comply with any processes within them and these documents might include restrictions on gifting shares, including to whom you can gift them. The board will need to resolve to approve the transfer and a shareholder resolution may also be required to waive any pre-emption rights.
Under the Vestd platform articles of association, a shareholder can transfer shares to a Permitted Transferee (as defined therein) subject to the consent of a majority of the Directors. Such transfer will not require a shareholder resolution. Any shareholder proposing to gift shares to a person who is not a Permitted Transferee will be required to follow the pre-emption provisions at article 16 of the Vestd platform articles of association. This involves notifying the company of the proposed transfer, and the company offering the shares to existing shareholders pro-rata to their existing shareholdings on the same terms as they are being offered to the proposed recipient of the gift. The shareholders may choose to buy none, some or all of the shares that are proposed to be transferred. The shareholders may waive their pre-emption rights using a shareholder resolution.
Tax implications
Unless shares are being gifted to the shareholder’s spouse/civil partner or a charity, it will be considered a disposal of shares and will give rise to capital gains tax. The amount of tax payable will be calculated based on the difference between the value of the shares at the time the shareholder bought them and the value at the time they gift them. HMRC has set up a calculator to help shareholders know how much capital gains tax they will pay. Tax liabilities may vary depending on an individual’s circumstances and professional tax advice should always be sought as in certain conditions CGT relief may also be applicable. For more information see the HMRC guide.
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