Joint Venture
October 24th, 2008 . by DanDear Sirs,
I have a question concerning a joint venture between two UK limited companies and I would be grateful if you could provide some information on both the formation aspects, shareholding and the eventual dissolution of the business.
1. In a limited company - can companies own shares rather than individuals? We are thinking of having two people as act as directors but then two companies as shareholders.
2. If we set up a company we would aim to have very limited or zero dividends - but if there were any, would they just divide between the shareholders (or the Directors?)
3. How do you wind up a limited company - is it messier than dissolving a partnership or easier? What happens to the trading name if the company is folded?
4. Would a buy out of shares be available so we could allow a third Director to join and buy some of our shares so he could also be a shareholder at a later date?
Dear Dan,
In answer to your questions regarding the company, I will respond as follows:
1. Shares in a company can be owned by other companies, individuals or any combination of the two. It is perfectly permissible for the two incorporated entities to be the shareholders and for the equity units to be apportioned between them in any manner the parties agree.
2. Company dividends are usually declared at X pence per share and therefore ordinarily would be paid to the shareholders according to the proportion of the total held by each. So if the two companies own 50 percent each, they would receive 50 percent each of any dividends paid.
3. Winding up a limited company is not messy as such. Most unwanted companies are dissolved. The main rules are that it should not have traded for 3 months and should inform the main stakeholders of its intention to file for dissolution. The actual dissolving of a company requires the competition of a 1 page form and a £10 fee.
If the company being dissolved had a trading name, that is, a name which it used, then essentially that trading name would cease when the company did. If a name is trademarked, then the ownership of that trademark would be rescinded if it was not passed to another party prior to the dissolution.
4. Most UK limited companies are incorporated with an authorised share capital of £1000 shares of £1 each. I advise people in situations where they might wish to allocate additional shares in the future that they should issue as few as possible on incorporation.
What this means is that if the 2 companies were to be equal shareholders then you could issue 1 share to each of them. That would then leave 998 shares available to issue to other parties (or themselves) at any stage in the future.
Issuing new shares is a simple process of filling out a Form 88(2) which you can be downloaded from Companies House or many other company formations agent’s websites.
In terms of forming the company most agent offer facility whereby they supply you with a form for you to enter details of the directors and shareholders and then they will incorporate the company for you. There are of course is always the online facilities available for you to do this yourself.