Legal and Business Issues: CGT Relief, Share Transfer

Q. 1(a) Entrepreneurs can claim relief from CGT when they make gains out of selling their business, so that they have to pay a lowered rate of tax (10% on the first £1 million gain). This is applicable in the situation that the owner of the business owns the business as sole trader or business partner with ownership of at least two years. Furthermore, the company’s main activities should be in trading. Based on these conditions, Daphne can qualify for the relief. If she seeks guidance on navigating the complexities of tax implications, she might consider seeking professional advice or accessing resources on business dissertation help.

Q. 1(b) Daphne acquired the holding for £ 97000. She sold it for £

174000, which is a gain of £ 77000. The other taxable income for Daphne this year is £

55000.

Step 1: Taxable income: 55000

Step 2: Taxable capital gain: 77000 – 12300 (CGT allowance) 64700

Step 3: Adding 1 and 2 119700

CGT payable 10 percent for the year on 64700 = 6470

Q.2(a) For the share transfer, a board resolution is to be passed agreeing to the transfer of shares to James. It can also be done through an ordinary meeting.

For the purpose of sale of storage facility, an ordinary resolution of the shareholders is required.

Q.2(b) Share transfer: Stock transfer form with details is to be submitted to the HMRC. The next step is to have the board of directors approve the transfer of shares in a meeting or through a board resolution. The next step is to provide a copy of the Stock Transfer Form to both the transferor and transferee.

Change of name: special resolution to authorise change of name in shareholders’ meeting is to be passed first. The shareholders meeting can be authorised by the board of directors where the change of name proposal is made which is then put to the shareholders. In this case because written resolutions are generally used by the company, the copy of the written resolution proposing the special resolution will be circulated to members. Once passed, the company will file a copy of it at Companies House within 15 days of the resolution.

Sale of storage: The directors can propose sale of storage and put up the resolution for the shareholders. This has to be decided by ordinary resolution.

With regard to whether Valerie and Mark can block the proposals, with Louise agreeing to it, James being the chairperson of the board has the casting vote. In decision where ordinary resolution is required, change can be effected even if Valerie and Mark vote against it, because in case of tie in votes, a casting vote can be used by the chairperson to decide the matter (Article 15).

Q.3.

Q.4 (a)

With regard to the first issue, it would be advisable to enter into terms related to specific duties of the partners in the firm. Section 24(5) provides that every partner may take part in the management of the partnership business.

With regard to the second issue, it would be advisable to include a term related to fixed term partnership if the partners have a time frame in mind for the period of partnership. In the absence of that, terms may be included on retirement of partner as per Section 26.

With regard to the third issue, Section 24(1) provides that all partners are entitled to share equally in the capital and profits, and must contribute equally towards the losses sustained by the firm. Therefore, it is advisable that all partners contribute equally.

With regard to the fourth issue, terms may be included on whether partners can be involved in helping other galleries and what would it mean to compete with the partnership (Section 30).

Q.4 (b). Supervising solicitor should not consult with David because she is already consulting with Jenny. The Solicitors Regulation Authority provides that solicitor should not act in a matter involving a conflict of interest of an existing client (SRA, paragraph 6.2.). This can happen where solicitor has separate duties to act in the best interests of two clients in the same matter (Bolkiah v KPMG [1999] 2 AC 222). The SRA allows the solicitor to act for two clients in case of substantially common interest if the clients have given their informed consent in writing (SRA, paragraph 6.2 (b) (i), and there are safeguards to protect confidential information (SRA, paragraph 6.2 (b) (ii)), and it is reasonable to act for both clients (SRA, paragraph 6.2 (b) (iii)).