With Brexit, international market and general economic risks looming the role of the Irish entrepreneur is more important than ever to maintain Ireland’s economy.
As Irish entrepreneurs invest the economy grows, employment numbers are maintained and increased, and the driver of Irish economic activity is diversified to compliment multinational investors.
When entrepreneurs invest they take commercial risk motivated in part by the financial reward that follows business success. The Irish CGT rate is 33% and such a high CGT rate can discourage investment by entrepreneurs.
The special entrepreneurs CGT rate of 10% partly addresses this but has two key downsides:
This compares with the UK relief which applies to gains up to €10M.
It makes sense to encourage investment in business of scale and to invest in more than one business. Entrepreneurs will be watching Budget 2019 closely.
If the limit on the relief is increased closer to the UK limit of €10M and the full time working relief requirement can be relaxed there will be more reason than ever for Irish entrepreneurs to invest with the benefit that brings to the Irish economy and employment.
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A shareholder’s agreement is a contract between the shareholders of a company. The purpose of it is to outline the procedures to be followed within the company and how the company is to be managed. It can also serve as a means to address issues that might cause shareholder conflict in the future. It is confidential and is not available to the general public. It can be very beneficial to family companies as an aid to avoid disputes further down the line. Matters that are often addressed in a shareholder’s agreement are as follows;
Provisions can be put in place to restrict the transferability of shares. Consent of other shareholders can also be added and provisions for what happens in the event of divorce or death.
Differing shareholders may have differing views on how to distribute the wealth of their company. A shareholder’s agreement can be used to agree upon such a policy.
The agreement can provide for clauses which state that certain decisions may only be reached if a certain % of shareholders approve of it. This would help protect minority shareholders in many instances.
Conditions can be put in place for share valuations upon a shareholder’s exit from the company. Other clauses include the rights for other shareholders to buy the shares before they are offered to the market and the right for other shareholders to buy the shares at a discount compared to third parties.
This can be of great benefit to shareholders and can provide a roadmap to be followed in the event that shareholders have a dispute. This can help prevent significant legal bills in the future.
Although it is often far from people’s minds at the time, the best time to introduce a shareholder’s agreement is when a company is being set up. Where this is done, it can be of great benefit to the company and its shareholders.
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This is a common issue in businesses and these two methods are effective:
These shares will carry restrictions such as they can’t be sold for 5 years. The benefit is that they can be substantially discounted when calculating their value.
These are a separate class of shares and the shareholders participate in the value of the company over a set hurdle.
We are happy to help. Please post your comment below or call Paul Leonard, Partner at Cooney Carey, on 01 677 9000. Alternatively, send him an email: firstname.lastname@example.org