Selling 49% share of Limited company

[Amberbright]

Hi there,

I need a little direction concerning an interesting offer to sell half of my business.

After 5 years all loans (inc directors loans) have been paid off, and so things are going to look really healthy as far as the balance sheet goes, but not until next year Mar 20011

Last years balance sheet 2009 was still red but 2010,is definately in the black. (everything went into clearing all debts)

The proposed offer was for a share in the company name, reputation and the lease but not the assets (book value approx 17k).

My accoutant says that the company is the company and you cannot sellshares on this basis.

So, the offer was relative to this asset being removed, but this is not right surely?

Moreover and most importantly, am I making the correct assumption in saying that a share value would be:
Assets less debtors= share value of company; divided by 2 = what the half of the business should be sold at. But I could be wrong

I know I shall need professional advice but your insights would be most welcome.:rolleyes:

[jim_price]

Hmm, this sounds rather odd. There is no debt so we assume that the £17k of net asset value is simply a level of working capital, plus some plant/equipment?

They don't want to pay for that element which is OK I guess, though I suspect it is probably the entire history of the company that they don't actually want. Again, this isn't unusual. Buyers will often take what we might term goodwill, fixed assets and a lease. The attraction (for the buyer) apart from it being lower risk, is that you can get a tax deduction for goodwill amortisation. Unfortunately it's not a win-win as the company selling those assets may (will) have to pay corporation tax on the proceeds before it can distribute anything to the shareholders, which will also be taxed in the hands of the shareholders - a double tax charge if you like.

I really have no idea how the buyer envisages you retaining what would effectively have to be a 51% interest in those assets. It would certainly make for an interesting shareholders agreement.

Not sure what you're getting at on valuation. There are many ways to value a business, sometimes it is with reference to net asset value, sometimes with reference to the company's future earnings potential. Ultimately, the business is worth what you are prepared to sell for and what they are prepared to pay.

[Amberbright]

Thank you,

An interesting agreement indeed. Thats the part that I dont understand; and if those assets are being used in the business, and profit being generated by that exploitation, (you might say), then what?!

It seems to me that this certainly benefits the buyer and not necessarily the seller,

Am I correct in those asumptions, especially after the tax and the tax

[Amberbright]

A correction - sorry, theoretically I shall still be owning 100% of the plant equipment and working capital.

Hence my original post, how can someonepick and choose what part of the business they wish to own?

Seems odd to me, never heard of it before

[oldeagleeye]

Lets get real here. £17K of assets and working capital after 5 years of loans etc. This company ain't worth didly squat. Any plant element in that £17k wouldn't be worth a toss if sold at auction.

How anyone would want to buy into a company with such a poor record and virtually no assets is beyond me. I mean 5 years to break even. Sorry OP the management sucks. If you have a mug that wantsto invest I suggest you rip his arm off.

Rob

[Chris Ashdown]

Is it not the case that if you remove the 17K of assents and take that out of the sale then the company is now running a 17 K loss

To me this would mean they want the property lease and also the name to trade in a different area, but not really clear from OP