How best to restructure my offshore company if I want to accomodate a new shareholder but the remaining structure is not even?


#1

I have an offshore company (Jurisdiction: Seychelles) and one of my partners wants to cash out. We found a new shareholder, but we want to restructure things differently from before.

This is the first major restructuring of the company. Up to now, the total number of shares is 10 and each partner has 1 to 5 shares each. But after we take in the new shareholder, not all of our stakes will be clean and even anymore.

I am wondering if what I will describe below is the “simplest” approach - that is, it requires the least amount of time and (hopefully) money to be paid to our offshore company agent, the company that registers this stuff for us in the Seychelles.

In trying to figure this stuff out so I can propose it to my partners, I searched Quora.com and StackExchange and discovered forums like OffshoreCorpTalk (http://www.offshorecorptalk.com/threads/tips-to-incorporate-offshore-company.15303/#post-37436)

But it wasn’t easy to figure out how best to search for this kind of question, and what I found in the time I have were not really related:

https://www.quora.com/Equity-Dilution-If-a-startup-can-always-issue-new-shares-what-value-is-there-to-stocks-options

https://www.quora.com/Can-a-shareholder-who-has-signed-an-agreement-allowing-the-majority-shareholders-to-determine-how-new-share-issues-will-be-distributed-have-his-shares-legally-diluted

https://www.quora.com/I-started-a-company-with-2-friends-a-share-of-30-30-40-Now-someone-else-want-to-invest-and-become-shareholder-how-much-share-each-one-will-get

Reading through some of these links, I recalled that stocks splits can be done. So here is what I am proposing:

Let’s say we have 3 shareholders
A = 5 shares = $5 total investment
B = 3 shares = $3
C = 2 shares = $2

And each share = $1

We now want to change our company so that:
A = 430 shares = $4.30
B = 260 shares = $2.60
D = 310 shares = $3.10

So even though the same number of shares in the end, and the company valuation has not changed, we have oddlots that look like they complicate things. What should we do?

1. Board issues resolution to split stock by 100
So now…
A = 500 shares = $5 total investment
B = 300 shares = $3
C = 200 shares = $2

And each share drops in value = $0.01 share

2. Share transfer documents record the following:
C sells 200 shares to D for $2
A sells 70 shares to D for $0.70
B sells 40 shares to D for $0.40

And the result is:
A = 430 shares = $4.30
B = 260 shares = $2.60
D = 310 shares = $3.10

Is this the easiest and simplest approach?

Since the value of the company doesn’t change, and the prices of the shares do not change after the split, there are no capital gains taxes. And since this is a Seychelles company, there are no documentary stamps or fees related to this action.

To book these changes for the authorities in Seychelles, we need to provide:

  1. Application for Share for D (new shareholder)
  2. Instrument of Transfer for A(seller, current shareholder)
  3. Instrument of Transfer for B(seller, current shareholder)
  4. Instrument of Transfer for c (seller, not a shareholder)
  5. Board resolution issuing shares to D?
  6. Consent to act as Director - D

Updates must also be made to the
7. Register of Members
8. Register of Directors
9. Register of Transfers

And for the new guy (Shareholder D), we also need Due Diligence documents
10. Identify documents for ultimate beneficial owner (certified)
11. Proof of address (certified)

Does this sound right? Or is there a better/simpler/cheaper/faster way?