In this video, I explain why diluting majority shares for the UK sole representative visa is not a good idea.
I have come across examples of people seeking to qualify under the sole representative visa by diluting their shares. This is often a bad idea, and can in many cases lead to refusal either upon the initial application or subsequently.
Diluting shares: Remember this provision of the guidance as regards owner-operators:
Sole Representatives must […] not be party to any other arrangement in relation to the overseas business whereby they are effectively the majority owner, controller, or the main beneficiary of that business, even though they may not actually own more than 50% of the business. For example, an applicant would be ineligible if a silent partner owns the majority of the overseas business but has agreed to give majority control and profits to the applicant.
I have a retail client applying under this route. The business is not innovative (he cannot qualify for the start-up visa or innovator visa) but it is his member of staff who will be getting the visa and will be setting up the UK entity.
First sole representative, then sponsor licence: Depending on the scenario, after a sole representative has come to the UK (there cannot be more than one), you can apply for a sponsor licence and have other employees join later, sponsored by the UK entity.
The government’s position is:
One [sole representative] may be admitted, and then later apply for a sponsor licence to allow other employees to join them under the Skilled Worker or Intra-Company routes of the points-based system.
The sponsored worker’s role must not be created mainly to enable you as owner-operator to come to the UK. It must be a genuine role so you cannot effectively self-sponsor. Prior to 1 December 2020, if you had a Tier 2 (General) visa, you could not hold more than 10% of the shares in your sponsoring company unless you were a High Earner (i.e. earning more than £159,600 per year). However, under the new Skilled Worker rules that were introduced on 1 December 2020, there are now no restrictions on the number of shares an applicant can hold in a sponsoring company. But in any event, it would normally be the overseas parent company of the UK subsidiary, rather than you personally, that had shares in the UK entity. Either way, it is a question of substance rather than form and company structure. The best analysis is that there ought not to be a material conflict of interest in the sponsorship decision.
Potential SoC Codes for an owner-operator of a parent entity: Subject to the decision being made appropriately, the UK entity can sponsor for roles including:
To have the sponsor licence the UK company would need to have at least one ‘settled worker’ as a Level 1 User (and therefore when applying as the Authorising Officer).
In practice: I think that the scenario of an owner-operator of an overseas entity being sponsored is only likely to occur in a situation where there is an overseas business of significant size or a Group of companies with substantial presence. It is not likely to be appropriate where there is a small operation where the owner-operator owns 100% of the parent company (where there could be said to be a clear underlying conflict of interest). Every case turns on its facts and I’d be happy to discuss your scenario if you are considering setting up a business in the UK and looking at your options.