What's in it for the chair [2]

Having read the CEO's diary for sometime it occurs to me that the Chair has been pushing for this position for a while now, has this been the his ultimate aim since the beginning? Is the CEO being sweep along in some grand plan designed from the start by the Chair or is it my imagination? Aren't the roles of the CEO and Chair to further the interests of the shareholders? If so why has the whole situation evolved? Isn't the Chair supposed to be there to mediate between the shareholders and the CEO why is he pushing so hard for an MBO? Sorry may be I'm confused!

Invoice discounting of service invoices [3]

I used to be FD of a company that used invoice discounting. We sold a mix of goods and service. The service was billed monthly in advance. The discounter, HSBC, would not advance against the service invoices until the end of the month they related to, ie the service had been provided.

On a more general point if you have a good track record of cash generation and you can confidently project that into the future then one of the less agressive VC outfits would be interested with out you needing to be too concerned about the pornability of your assets.

Getting asset finance against the various existing assets is a route used where people feel they can get enough money without going to a VC. In a business with a low return on its assets there will not be much premium over asset value in the price, if any. In such a case borrowing against all the assets plus a little personal money and some deffered terms may be sufficient.

From your past writings I guess your return on assets, excluding surplus cash, is quite good. So I suspect asset finance will not be sufficient.

It may be easier than you think [4]

You have available:

Cash
Invoice discounting
Stock funding - it is possible
Unsecured bank borrowing - still available for MBOs
Deferred payment terms to the vendors
Management equity subscription
VC equity - if you really need it

Why not buyout the shareholders completely?

Deferred payment [5]

You could also look at deferring their payment over a number of months rather than payment on the day or alternatively base the deal on an earn-out basis i.e. base the goodwill of the company on actual 1/2 yearly / annual profits.

You really want to buy in... [6]

...and carry on working with these people, in these circumstances?

You're either very brave or very, err, brave.

Prepayments [7]

"The payment record is pretty good, but some of maintenance is a bit slow, precisely because it is in advance. It still pays to do this. There is no charge on this debt. "

There is always opportunity cost, though if you're awash with cash anyway then this may not be an issue.

New Recruit [8]

Hi CEO,

We're looking for new candidates, your political skills are astounding!!

Please contact me at conservatives.org if you want a new job?

Best of luck with the MBO

Dave Cameron

Sale? [9]

I do wonder whether the shareholders might be plotting their own sale of the business, or part of it!

A few thoughts... [11]

1. If you do resign, rather than taking you back with modified conditions, you might find the shareholders agree that Ex-CEO stands in the gap and you stay resigned. It is clear they don't understand how this will add to your depth and ability to manage the company in their interest.

2. Business angels. They are buying into the man (you) and your team as much as they are buying into the company. Would they support you buying your way into the other company instead of you being a non-exec there? Is the owner there is somewhat older - you could become his retirement plan.

3. If you stay where you are - Don't buy in. Buy them out. Or if you do buy in, reduce their interests to a minority stake. You want to make sure you (and your team who I am sure will also want a stake) rule when the existing shareholders continuing foolishness leads to future conflict - which I am sure it will.

Complete buyout is best [12]

As Mr and Mrs ex-CEO are still bickering, I think that the best way forward for the company is for them to leave completely. They obviously still have feelings for each other, especially Mrs ex-CEO for Mr ex-CEO.

If they leave, they will no longer have to meet to discuss the company, and can this will help them learn to recover from the divorce. Do they have any children? They are surely in the worst position.

Also they will each have a pile of money to spend as each of them wishes; they will no longer have to get permission from the other to draw money from the company.

The company will benefit, because it will no longer be affected by their personal dispute.

I think that you should strive to remove them completely from the company; without having installments to pay for the shares, or any form of loan or debenture from them. If they each have a minority stake or are owed money by you or other people, then one is likely to insist on an AGM, and find excuses to discuss things with you; the company will still have to deal with their personal dispute.

I'll get me 'at... [14]

Of the three scenarios/outcomes set out in the posts below, the one that I think entirely unlikely (and I'll eat my hat if I'm wrong) is Alistair's - that the ex-CEO will be reinstalled. Not without Mrs ex-CEO's approval, because of the shareholders' agreement, and that won't happen.

The suggestion that the two of them still have feelings for one another - well, feelings of mutual loathing perhaps... I think Marion has it right - the problem is that in order to make this work you have to get Mrs ex-CEO's agreement, and what really floats her boat is doing Mr ex-CEO down.

It's a shame this didn't blow up before 5 April, because you could then have used the argument that business asset taper relief was going to be taken away. Depending on how much money you are aiming on paying them for their shares, remember that they will need to remain employees or officers of the company if they do not use up all their entrepreneur relief in any deal you agree, so that they can get it on a subsequent disposal of their remaining shares.

No BATR? [16]

Wow. You really HAVE got a cash pile then!

If the BATR conditions aren't going to be met for the last year of ownership, then they aren't going to get entrepreneur relief either. But 20% of the assets even when you include a valuation for goodwill? I f so, I can see why you want to use it to reduce the shareholders' stake...

BATR [17]

One still to be resolved.

It's one step at a time.

Employment related securities [18]

You say that any tax change can only improve the deal, but bear in mind that the shares you and your fellow-workers acquire will be employment related securities. That of itself is not a problem, but it does mean you need to make sure the BIMBO structure doesn't fall foul of the ITEPA 2003 Part 7 rules which could convert any capital gain into employment income. On the face of it, what you propose looks OK,because the only potential ratchet would effectively dilute your shares, but you might want to look at the HMRC manual paragraph here:

and at the Memorandum of Understanding it references. You don't want to agree something in principle with Mrs ex-CEO and then have to go back and ask for changes which are needed to improve your tax position rather than hers.