And why you should probably check yours today

Imagine a classroom where the teacher glances around and realises something is amiss. Half the pupils shouldn’t be there, and half of those who should are mysteriously absent. Lessons are unlikely to proceed. More likely: frantic phone calls, urgent meetings, and a swift review of the register.

Now consider this: many business owners are running that very classroom. They just haven’t noticed yet.

In the corporate world, shareholder registers are often left to rot quietly in the corner. Former employees — or long-departed consultants who were once paid in shares rather than cash — continue to hold equity. Meanwhile, loyal current staff who were “definitely” promised a slice of the action are left with nothing but fond memories of a verbal assurance.

None of this seems terribly urgent — until it is. And when it is, it’s usually because a sale is in the offing. At which point, unresolved equity issues tend to detonate. Because it will make you less attractive in the eyes of a potential purchaser.

Here’s how it plays out:

• Unwanted shareholders suddenly acquire maximum leverage. Their holding, previously negligible, now matters deeply.
• Promised share grants become mired in red tape — or worse, taxed at eye-watering valuations.
• Employee option schemes (like EMI) become borderline unworkable, as timelines, tax windows and eligibility tighten rapidly.

In short: the ghosts of equity past come back to haunt you. Expensively. And if someone is thinking of buying you, none of that is a good look.

So what should you be doing now?

1. Audit your exes

Dig out your Articles of Association and any shareholders’ agreements. Many contain provisions that allow you to buy back shares from leavers — often at a relatively modest price. If they don’t, amend them. This is boring, tedious, entirely thankless work. Do it anyway. Future-you will weep with gratitude.

2. Understand your buyback options

If the company has the cash, buying back shares may seem attractive — but beware the tax consequences. Company-funded repurchases are usually taxed as dividends (currently up to 39.35%), not capital gains. Sometimes it’s more efficient for remaining shareholders to acquire them instead. A little structuring here goes a long way.

3. Don’t issue shares without a proper valuation

Giving shares to valued employees? Sensible. Doing so without a defensible valuation? Dangerous. Without proper tax clearance or professional input, you may end up gifting a tax bill — and a headache — to someone you’re trying to incentivise.

4. Use employee share schemes properly

Government-backed schemes like EMI (Enterprise Management Incentive) are one of the few moments where tax, logic and incentive align. Done correctly, EMI schemes:

• Allow staff to benefit from capital gains tax at 10%
• Give the company a corporation tax deduction when options are exercised
• Align staff motivation with enterprise value

In short: they work. But only if implemented properly — and early enough to be meaningful.

A clean, up-to-date shareholder register isn’t just a legal nicety. It’s a strategic asset. When it’s tidy, you retain control. When it isn’t, you’ve invited friction, delay and unwelcome negotiation into your eventual exit.

The rule is simple:

If someone’s no longer in the business, they shouldn’t still be profiting from it.

And if someone is making things happen today, they shouldn’t be relying on handshakes.

Get it sorted. Your future self — and your future buyer — will thank you.