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F E Smith
F E Smith, Solicitor
Category: UK Law
Satisfied Customers: 9595
Experience:  30 years in General Practice
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I've been given 2.5percent share in a company that I've not

Customer Question

I've been given 2.5percent share in a company that I've not yet handed any money over but asking 5000 pounds. This is friend and he said it's just back up in case anything happens to him before he can pay me back a bit like a loan I'm giving . It's the first year in business and he is not registered as a director at companies house but his partner is . He says his partners son also has 10 percent as well but not down as a share holder yet . Am I liable for anything. He sent as email as ordinary share but has sent me a photo of a letter as hard copy too. Can you enlighten me as I said I was prepared to just give him s loan but has done this so he feels I get something out of it . Can you enlighten me if I'm liable at all for this company and any debts it may have?
Than you
Submitted: 1 year ago.
Category: UK Law
Customer: replied 1 year ago.
Obviously the business is not making any money at present and accounts not been sent to companies house for the first set of accounts
Expert:  F E Smith replied 1 year ago.

Your liability is limited to the value of the shares. If you are paying £5000 for 2.5%, that is your total liability.

If he is worried about the company going down the tubes and you not getting your money back, he could always give you a charge over the company’s assets because that really is worth something whereas if the company goes down the tubes, you get nothing.

It depends whether your concern is liability if it all goes pear-shaped or whether your concern is losing your £5000.

Can I clarify anything for you?

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We can still exchange emails. Best wishes.


Customer: replied 1 year ago.
I do not u derstan my liability will be 5000 pounds? And what if I don't pay for them and just give him a Loan because on paper it looks like I've been issued them. If the company goes into debt or bankruptcy will I have to find another five thousand pounds?
Expert:  F E Smith replied 1 year ago.

If you buy shares in a company and you have paid £5000 for the shares, and the company goes bust, you lose your £5000. That is your total liability, the value of the shares. You would not have to find another £5000

Is that clearer for you now?

If you don’t take the shares and just make the company a loan and the company goes bust, you lose your loan because you are an unsecured creditor unless the company grants you security over its assets.

There is no reason not to take the shares because you have no more liability than your first £5000 regardless but it does give you a piece of the company if ever it takes often becomes extremely successful and valuable