ERSM100130 - University Spin-outs

Joining a spin-out later on

Example 5: 皇冠体育appophrastus

Continuing from Example 3 (ERSM100110), 4 months after IP was transferred in and after the funding was introduced, Plato asks another employee, 皇冠体育appophrastus, of the Republic University to join the spin-out and subscribe for 5 shares at par of 拢1 each. He was actively involved in the research. 皇冠体育app shares are currently worth 拢800, interest in the commercial exploitation of hemlock having recently fallen.

Outcome

皇冠体育appre is potential liability on acquisition of shares by 皇冠体育appophrastus at undervalue, only partly relieved by relief for spin-outs:

  • Value of shares received 5 x 拢800 = 拢4,000
  • Payment of shares - (拢5)
  • Potential charge on undervalue - 拢3,995
  • Spin-out relief - effect of IP - say - (拢2,000)
  • Liability on - 拢1,995

皇冠体育appophrastus will be entitled to relief under ITEPA03/S452 for the element in the value of the shares he is acquiring that relates to the IP transferred in from his employer. However he will have to accept that if he pays less than the market value of the shares, even ignoring the effect of the IP, he will be liable to a charge on the difference.