Ten Bobsworth wrote:A few quick points on the latest Mem. & Arts.
Regarding B shares:
Clause 12.2 - not entitled to dividends
Clause 12.4 - not entitled to attend or vote at general meetings
Clause 16.2 - not entitled to transfer shares without prior Board approval
Clause 12.3 - only entitled to a pay out on any proceeds exceeding 'the hurdle value' of £39million.
If Team Brittan could get their share of £39m, I expect they'd be well pleased.
Lots of other involved stuff, partly concerning UK FF. I don't propose to go through it all except to note that Clause 14.5 refers to a sum of £5million.
Interesting Bob, thank you.
I note that the Hurdle Valuation is stated as £39m in the 'definitions listings' at the start of the Memorandum and Articles but how does one calculate such a figure? Is it a bit like a 'buy-out' clause in some footballers contracts for instance, where if someone 'offers' that price, then a sale can be negotiated?
Also it would seem the B shares are completely worthless until FV is sold for £39m or more.
I'd never heard of 'the hurdle value' before, so looked the definition up and this is what I found ...Hurdle rates and valuations
The first step to setting up a Growth Share scheme.
What is a hurdle rate and how is it set?
You will need to set a hurdle rate for your Growth Shares before you can set up a Growth Share scheme on the platform.
A hurdle rate is the level, in £ per share, above which the beneficial owner of that share will have full economic rights to the company in question.
For example, let's say your company is currently valued at £1 per share and you want to issue growth shares to a new employee.
Hurdle rates often carry a small premium to reflect the hope value of the shares - so in this instance it could be set at £1.20.The hurdle rate quite literally acts as a hurdle the recipient must overcome for their shares to carry value, and it incentives them to help the company grow, as any value above their hurdle is theirs to keep.
A few years later, the company has grown and is eventually sold for £5 per share. The recipient is rewarded for their hard work and takes home the amount above their hurdle - in this case, £3.80 per share.
Ordinary shareholders will participate in the full amount of the sale.
Growth shares and hurdle rate are not just an incentive for growth, but also protect existing shareholders from dilution and simultaneously respect the work they've put in to grow the business thus far.
As the company grows, hurdles can increase. Using the example above, if another employee joined a year later, their hurdle could reflect the current share price plus a small premium - let's say £2.20.
When recipients receive their growth shares, they shouldn't incur a tax liability as the growth shares are essentially worthless at the time of issue.
They will only need to pay Capital Gains Tax on the eventual sale of the shares - based on the difference between the eventual share price and their hurdle rate.How can I get a hurdle valuation?
Unlike an EMI valuation, a hurdle valuation cannot be approved by HMRC before issuing the shares. Instead a 'self-assessed' valuation for the current value of the shares is set, and a small premium is then applied to reach the hurdle. This valuation is then kept on record.
Because it cannot be approved by HMRC, a hurdle valuation will need to be more conservative (a little higher) than an EMI valuation, to make sure there are no nasty surprises down the line. Other than this factor, and some slight differences in the format of the report itself, the valuation process is largely the same as it is for EMI.[You must be registered and logged in to see this link.]
As for the UK FF £5m, I've looked back over the previous Memorandum and Articles and the current addition has simply copied and pasted the notes on this from the earlier ones.
To my mind therefore I can't see a reason for retaining this clause in the current edition simply because the scheme has ended.
I think what the £5m relates to, is that FV Articles allowed them to 'purchase' up to £5m worth of UK FF loans - and NOT that they did purchase the full permitted allocation.
I thought we (you, Barry and myself) were quite certain now that only £2.5m of UK FF was taken up in the end, I still we were right.
Going back to the B shares again, I can't see how Evatt and Hart would be motivated to stay at the club by these shares unless they really believed they could increase the value of FV to over £39m - and even then I presume they would only get a hundredth per share given to them compared to the A shares?
Ok, better than nothing but hardly a Kings ransom coming their way either?
If anything it seems to me to support my leaning towards FV becoming valuable (and being so more quickly) by other means that just on the football pitch.