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Property sale at under value from insolvent company

I have a client who has an insolvent building business which owns a residential property. The property has been on the market at £240k ish for several years with no luck in selling. The Revenue currently have security of the property for unpaid VAT and PAYE to the tune of £95k. The business is owned by a mother and son, the mother has a substantial directors loan which will never be repaid, there are a few other small liabilities totalling £25k. The nephew/grandson of the directors is able to raise funds to £130k to purchase the property. The company solicitors state this this will not be allowed as it is the sale at an undervalue and any subsequent liquidator could come back on this at a later date. As the company is insolvent there can be no indemnity insurance taken out against this possibility.

My suggestion is for the mother to gift cash of say £80k to the grandson who then buys the house for £210k (surely a reasonable market value?). He buys the property, all company debts settled and £80k of the DLA gets repaid to mother. Raising £80k in cash, albeit short term, may be an issue given her advancing years; her wealth is tied up in her residential property.

Alternatively would appointing a liquidator be of any use? Would they have a problem selling the property to the grandson for £130k given that it would satisfy all company debts?

Or is there some other way?

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15th Nov 2011 10:59

I am guessing

that a liquidator would want to put it up for auction!

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15th Nov 2011 11:22

Waive directors loan ?

Why doesn't the mother waive her rights to the directors loan such that the company is no longer insolvent?

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15th Nov 2011 11:24

Or if that would give rise to tax liabilities...

...gift part of her loan account to the grandson, who then uses it as a deposit.

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15th Nov 2011 16:21

Couldn't this be a further issue in as much the gift of the loan in an insolvent company isn't actually worth anything?

 

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15th Nov 2011 11:46

Assuming there are no other creditors

Mother writes off sufficent amount of loan to ensure that the company is no longer insolvent. Mother and son as shareholders and presumably directors can then consent to the disposal of the property to the grandson for £130k - minuted in a directors meeting. Following the sale and the subsequent payment of all third party creditors the balance can be paid to the mother and the company can be struck off. Alternatively an insolvency practitioner can be appointed to do a MVL at that point, which should have a small cost.

I would be inclined to approach a good IP to informally guide the process with the intention of appointing that person to do the MVL at the end.

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By ringi
15th Nov 2011 13:11

Mother and Son both should have independent legal advice.

Be carefully that on one can ever say that the son took advantage of the mother’s age, to trick her into doing something…

 

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