Thinking of having children under 18 hold shares in a company?

Our Company Secretarial team are increasingly helping clients looking after family companies interested in this route for tax purposes – however, you may not be aware of all the legal issues involved. Seeking advice prior to issuing the shares can help avoid future problems. We have outlined below a couple of the solutions we are currently providing to our regular clients.

Potential Pitfalls of Issuing Shares to a Minor

Strictly speaking, there is nothing under English law to prevent a child under the age of 18 (a ‘minor’) holding shares. However, as a minor lacks legal capacity having them as a shareholder raises a number of problems for companies:

  • Where a minor holds voting shares it is not clear that they can validly exercise their voting rights before turning 18. This could potentially hinder the company’s ability to meet quorum requirements necessary for general meetings.
  • Even where a minor is old enough to both sign documents and understand what they are signing, any agreement or obligations that minor enters into regarding company shares will not be legally binding on them and can be renounced up until the point that they turn 18.
  • Banks have, in some cases, refused to open a bank account for a company where there are minors holding shares.

Our Company Secretarial Team offer the following solutions

  1. We can set up a trust for the minor until they turn 18 (preferred). The adult trustee would be shown as the shareholder at Companies House/in the company’s books, but would have a separate trust deed in place stating that they are holding the shares on trust for the minor. This can include a signed, undated stock transfer form in favour of the minor which can be dated and put into effect when the child turns 18.

    Our prices start from £75 +VAT per trust deed

  2. We can also set up multiple classes of shares with a non-voting class for issue to the minor. This avoids the problem of the minor blocking company decisions set out above, although there will still be problems with them being asked to pay for their shares or transferring shares before they turn 18.

          Our prices start from £150 +VAT for creating multiple share classes

Please contact our CoSec helpline if you want advice on the best structure for you or your client: 0800 085 45 05.

Written by Roberto Martins