Should I give up directorship and shares in husbands Ltd company?

[Bakedbanana]

My husband is self employed via a Ltd company. He originally did this by himself as sole director but then we got a new accountant who advised that I be added to the business as both shareholder and director in case my husband died. (But also nice to get a dividend!)

Now my husband wants to join with his long term friend (who works in same industry, they have worked together before). The idea is they are both shareholders and directors and I give up my bit. Friend is not married and they want the business to be 50/50 split.

Is there anything I should be considering here? Happy marriage. Business isn't huge, approx £20k profit plus 1 basic salary at the moment but hope it will grow in future.

Speak to your accountant

You could still give the friend 50% of the shares and you and DH hold your 50% split between you in whatever percentage you like. You could step down as a director.

It does depend on a lot of factors - the state of your relationship, your own income and tax status, whether you do any work for the company, what you predict the company profits and value to be etc etc

Basically if you were just added for the purpose of having another person on the paperwork and you have absolutely nothing to do with the business and have your own income then it probably doesn’t make much difference financially if you’re included or not.

However if you do want a say in the business decisions, and you have a low or no income of your own, then it can make good financial sense to have you as a shareholder, and possibly a director so that you receive dividends and maybe a salary too.

This is all more complicated if you and DH should split up or divorce, so that’s definitely a factor you should consider too!

What is the thinking behind the idea?
What would the new director be bringing in benefits to the company for 50% of the shares?
Are 2 companies merging? If so do they have equal values?
In a 50/50 split no one has a deciding vote, which could lead to problems in the future.
Having a third director doesn't necessarily require you giving up all your shares.
What do you personally have to gain in relinquishing your shares?

Thank you for the replies.

Yes I will speak to our accountant.

Not two business merging, just this new person joining. I work full time in a basic rate tax job in a different industry. I do help out in terms of proof reading copy, checking the accounts but not really enough to justify a salary.
Hadn't thought about keeping 50% but split between me and DH.

"What do you personally have to gain in relinquishing your shares?" Yes that's just it, I'm not sure there would be a gain for me personally. they'd like to make things more simple. But maybe it's not such a negative thing for me either?

If your husband died your family still matters and it would be simpler to have you as a director , not just this new friend, so that logic still holds I’d think.

Sorry but I can't see the logic behind this person suddenly becoming a director and being given 50% of the shares. Is he bringing investment? Skills? Why exactly is he being given 50% of the business including its assets (at your expense)? Is he going to work for a period of time for the company to see if it's a good fit before he is given 50% ownership?

If something was to happen to your husband, you would have to wrestle with a stranger about anything to do with the business, from the most basic information to to the biggest decisions.
Again I really think 50/50 split in shares in this case is a very bad idea, because no one has a decisive vote.
If something was to happen to this new director, do his shares reverse into you/your husband ownership? Do you have to buy them back from his estate? Can they be sold to yet another third party?

Even if it is your husband's business, if you are married without a contract and the company was started whilst you were married, it is 50% yours.

If you are no longer a director, and don't have shares, technically you have no means to do routine checks of the company's accounts (you can go on Companies House but the info will be yearly and not up to date) and you cannot make any decisions for the company.

I completely fail to understand the logic behind divesting you of your shares to give them to a third party or how you would benefit from that at all.

You would not longer be legally responsible for the company but that doesn't exempt you from all responsibility. For example if your husband owed money to the company, you would be jointly liable.

it's a good thing that you have some form of control over the business, I wouldn't let it go to a third party unless there were very convincing arguments. It all sounds a little weird OP.

It irritates me when men use their wives names and legal entities when it suits them/their business but still think that they can do whatever they want, including taking it away.