COMPANY DEMERGER

EQUALITY OF SHAREHOLDERS

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My company has 50% share of a property company and a private individual has the other 50%. He wants out and suggests a demerger.

The property company is VAT registered and has substantial loans from my company.

Can anyone help explain any difficulties with the propersition?

Replies (5)

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By johngroganjga
17th Aug 2018 11:19

The difficulties are of course all in the actual terms of the deal. As ever, the devil is in the detail.

What is the deal? Who is taking what assets, and what about the liabilities? Who is advising each party?

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Replying to johngroganjga:
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By davidbrewster
17th Aug 2018 11:36

5 properties one of which is on VAT option to tax with value of circa £2M.

Liabilities is the shareholder loan of £700K

The private shareholder expects to retain two properties but that does not divide by 5 and to pay his half of the loan in cash.

Sorry, to add to the original.

The private shareholder has had some tentative advice from his accountant but the corporate shareholder has not had any professional advice so far.

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By WhichTyler
17th Aug 2018 11:43

davidbrewster wrote:

the corporate shareholder has not had any professional advice so far.

Then the answer seems to be straightforward: seek professional advice (probably lawyer and accountant)...

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paddle steamer
By DJKL
17th Aug 2018 12:30

Depending on the types of properties one of the first issues might be the parties agreeing who is to get which properties, a monetary valuation is not always the only factor in the parties deciding which property is more or less attractive to them.

I suspect the first thing to do is sit down with an exploded balance sheet (each property individually valued in same) and roughly agree equitable values re division and who is to get what, thereafter, once there is at least an outline of what the two owners are trying to achieve, bring in the professional team to advise how the parties wishes can best be realised.

If solicitors and accountants ( as advisers not owners) are brought into these things before a rough deal is struck the whole thing can get bogged down before it starts, a roughly formed Heads of Terms for the professional team is often a very good way of controlling their fees and avoiding the whole transaction not proceeding.

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By gbuckell
20th Aug 2018 10:26

If correctly handled there should not be any tax cost apart from some stamp duty @1/2%.

But I concur with others that having a clear idea of who gets what is an important first step.

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