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for most small companies one
person-to-person companies if they want
to form if the directors want to form
the company themselves they really only
need to issue themselves with say a
hundred one-pound shares anything more
than that is his is pointless really and
potentially dangerous we have had a few
clients come to us over the years where
for some reason they've just just gone
mad and issued themselves with 40,000
one-pound shares or a hundred thousand
or or in one case five hundred thousand
why that is dangerous is because in
paints you just created a loan you now
owe your company 40 thousand pounds for
the shares if you've issued them and not
paid them and there'd been no reason to
pay it if you're just a typical
small small company why it's dangerous
is because if you go bust if you go into
liquidation at some point the liquidator
could say that the shareholders still
owe money for these shares and they
would want a hundred thousand pounds off
you maybe well if you only had a hundred
pound share capital you can see it only
lose a hundred pounds by potentially
losing a hundred thousand you have
basically removed all the advantages of
limited liability which is one of the
big points of having a company in the
first place fortunately there is a way
to correct this so long as your
company's making money and its balance
sheet is positive then you can do there
our process to cancel the shares and
wipe off the debt wipe off the money you
owe for that for the for the shares the
process is relatively simple you have to
do a resolution where you as a director
propose to counselors shares to you as a
shareholder you have to do a statement
of solvency saying you believe the
company's solvent now and will be for
the next 12 months and you have to issue
you have to fill in a form SH 1:19 sorry
an SH 19 form which you sent to
Companies House together with the
resolution and the statement of solvency
and that's it you then cancel the shares
and you no longer owe your potential
heir your company money
and you've made yourself safer
you
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