Valuation of second hand car dealer and MOT - company

Valuation of second hand car dealer and MOT -...

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Company owned by Mum, dad and son.

Dad died a few weeks ago, owning 10%. Mum owns 10% too, son 80%.

Balance sheet is negative by 20K, but there is DLA owed to the three owners totalling 175K. Plus goodwill of 50K (written down to this).

So if we, ahem, strip out the goodwill and DLA there is 105K of real assets, mostly stock and bank balance.

Profit is less than 10K after small director salary and commercial rent for premises.

Is there ANY suggestion that the company has value. I know BPR is in point but solicitors want a number.

At date of death the above numbers were relevant.  But is there ANY argument that a third party could buy the shares, on the understanding that the DLA would be written off and so the company is then in the black, albeit not making massive profits but someone else could turn it around.  Mum could decide to write off her and husband's DLA (she's getting his DLA) on the basis that there is no point having a DLA credit balance which has no chance of being paid AND the son would pay 40% tax on her death before he gets his hands on the DLA. So a suggestion could be made to w/o the DLA at this time. In which case is there any value in the company?

I should reaffirm, at date of Dad's death there was no inclination to w/o DLAs.

Thank you.

Replies (8)

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By The Innkeeper
19th Aug 2015 14:43

err

How is dad's will dealing with his shares in the company ?

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Replying to Beach Accountancy:
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By HeavyMetalMike
19th Aug 2015 14:47

Don't know, why? What am I missing?

Still need to do probate forms.

By selling company to third party I of course mean Mum and son selling their shares too.

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By The Innkeeper
19th Aug 2015 14:54

it was not

clear as to what was happening. Agreed you need to do the probate forms but if everything is going to dad then obviously there are no IHT considerations ( sorry to state the bleeding obvious to such an experienced member). Can we assume that mum and dad's DLAs are kept separate or are they being shown as one with the son as a separate one

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Replying to fawltybasil2575:
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By HeavyMetalMike
19th Aug 2015 14:58

The accounts disclose three separate DLAs.  I assume Dad's DLA is going to Mum.

And now I'm going to suggest that Mum w/o her DLA as only one son and he owns the rest of the company or will do in time. So why pay IHT on a DLA? Just a thought I was having in quick fag packet share valuation. So two queries, 1) might there be value and 2) no suggestion of doing that at date of death so at date of death is it all "a negative" ie shares worthless. Surely not?

 

Thanks

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By Steve Kesby
19th Aug 2015 15:01

Surely...

...you are only valuing half of a 20% interest? The son's shares are not related property.

So you're taking 10% of the company value and probably discounting it by around 90%. So you are talking about a value perhaps in the range £0 to £2,000. I'd go with £1,000 and carry on enjoying my afternoon snooze.

BPR may not be applicable if their any arrangements in place that amount to an automatic right for the executors to sell the shares in the event of his death.

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By The Innkeeper
19th Aug 2015 15:07

Please dont

assume that Mum is going to get Dad's DLA. Assumption is always the mother of all foul ups ( & that is the polite version !!!)in this sort of situation.You really should see the will to advise properly.

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Replying to JD:
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By HeavyMetalMike
19th Aug 2015 15:27

Thank you, both.

EDIT: I was going to ask about "what if dad had 60%", but same principles I guess. One could use suggestion that company value is after w/o DLAs. But you haven't disagreed with my rationale so great..

Snooze time.............

 

 

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By The Innkeeper
19th Aug 2015 15:36

@heavymetalmike

With respect to Steve ( and I do really mean that ) I would have valued the shares at par. Assuming ( I know what I said above) that the company is a £100 company I would have said £10. If the issued shares are materially different in value I agree with Steve's figure.

Now go and enjoy that snooze............

 

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