Unlisted investments
Shares in a private company, from an early round, a founder’s allotment or an employer: what a sale, a buyback or a transfer brings with it, and where we come in.
How people usually arrive.
A buyer has approached you for shares you hold in a private company.
The company is offering a buyback and you are deciding whether to take it.
You were allotted shares in an early round and the company is heading for a listing.
You want to transfer shares within the family and have been told a valuation is needed.
Where we come in.
What you can engage us to help with here, how it usually begins, and what is useful to have.
- Before you agree anything
- We set out what each route on the table would bring: a sale to another investor, a buyback by the company, or a transfer within the family. They are looked at differently, and how a buyback is treated depends on when it happens and, under the version now in force, on who you are to the company. You get a written comparison to decide against, before a price is agreed.
- Valuation and price
- We establish whether the transaction is expected to be supported by a valuation, on what basis and from whom, and what a price above or below it would mean on each side. The valuation itself comes from a registered valuer or a merchant banker.
- Cost and holding period
- We reconstruct the cost and the holding period tranche by tranche from allotment letters, bank records and any later rounds, which is where most of the difference in a private share sale is decided.
- The company’s side
- A transfer or buyback leaves the company with paperwork and filings of its own: the instrument, the register, the board record and the filing with the registrar. We prepare them. Some registrar filings need a practising professional’s certification, which is a separate step, and we tell you which ones.
- The return
- We report the transaction in the return for the year it completes, with the valuation and the cost records behind it.
It begins with what you hold and how you came to hold it: the allotment letters, the demat statement, and any term sheet or offer already on the table.
Useful to have, if you have it
- Allotment letters and share certificates, or the demat statement
- Bank records for each tranche you paid for
- Any valuation report you have been given
- The transfer, buyback or subscription documents, if a deal is on the table
Where this needs another specialist
Valuations are carried out by registered valuers or merchant bankers, not by us; where a transaction expects one, we say so and help you brief them. A share purchase or shareholders’ agreement is drafted by a lawyer, and we work alongside them.
What becomes relevant, and when.
Each consideration at the stage it tends to arrive, explained once. The ones shared with other matters say so.
Before you act
- Buyback vs sale
A sale to another investor, a buyback by the company and a transfer within the family are different transactions, each looked at differently, and how a buyback is treated depends on when it takes place: the rule has changed more than once recently, and under the version now in force it also depends on who the shareholder is to the company. Which route is on the table shapes everything that follows.
- Who the buyer is
At the deal
- Valuation
Transactions in private shares are often expected to be supported by a valuation, on the buyer’s side as well as the seller’s. Whether yours needs one, on what basis, and who would carry it out, is settled before the price is agreed.
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- The price against it
- Transfer paperwork
Transferring private shares involves paperwork on the company’s side as well as yours: the transfer instrument, the register and the filings that record the change.
While you hold
- Cost records
What the shares cost you, including anything paid in later rounds, is the number a gain is measured against. Allotment letters and bank records establish it.
Shared with four other matters. See them on the map →
- Holding period
How long the shares have been held, tranche by tranche, changes how a sale is treated. Early allotments and later top-ups often have different dates.
Shared with four other matters. See them on the map →
- A listing ahead
If the company is heading for a listing, the timing of any sale relative to it, and the holding period by then, are worth thinking through before agreeing anything. Whether the shares are listed on the day of sale changes how the sale is treated.
At sale
- Capital gains
A sale raises a capital gains question. The holding period and the cost you can show are what it turns on, and the price is tested against the valuation.
Shared with seven other matters. See them on the map →
- Registrations & filings
A transfer or buyback leaves the company with registrations and filings of its own to make. Those need to line up with what you report.
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At filing
- Income-tax return
The transaction, the gain and any valuation are reported in the return for the year it completes. That is where the records get tested.
Shared with nine other matters. See them on the map →