Business Closure/Sale rock & hard place.

[medi1977]

To explain the situation (will be generic avoiding names)

I am the director of a company that was sold in 2008 to another party but stayed on as Director. Due to the slow down in our clothing sector, I have been trying to sell it for the owner but not been able to obtain a substantial enough offer to meet the debts of the business.
The domain is worth around £10,000 , our amazon store and stock remaining around £4500 . A buyer has offered £7000 for everything but the owner has declined, the amount owed in overdraft, accountant fees is around £9000 total, so the offer is £2000 short to clear everything off with the bank.

The potential buyer is withdrawing end of this month, so I really want to sort this without the bank coming after me as the director/name on bank account.

It is a limited company and I do have a personal guarantee against the overdraft - so this is concerning me , the owner did sign a guarantee against my guarantee when buying the business , but now says it is down to me to sort out the sale to meet the debts of the business, which is hard on me as I affectively do not own it or get anything from the sale. I have spoken to the accountant and they said to do what you can before closing completely.

Where do I stand and what should I do

 

[Bestnes]

what about declaring yourself as a bankrupt?

 

[medi1977]

Declaring myself ? or the company?

 

[UK Contractor Accountant]

Why on earth did you sign a bank guarantee when you have no stake in the company?

 

[medi1977]

I signed the bank guarantee when I owned the company 100% , this was before the new owner purchased the business.

 

[Bestnes]

if you are not owner, why you worry? keep running the company. In future if someone decide to take money from you, declare yourself as a bankrupt.

 

[UK Contractor Accountant]

Suggest you delete your company name from your profile if you want to keep it generic avoiding names. With a simple search I have found director name & last set of accounts filed at Companies House.

Back to your question - there's not a lot you can do if the bank has a cast iron signed guarantee from you and the company is closed down owing them money. You can a deal with them to settle and pay over a number of months and then claim on the guarantee given to you by the new owner.

 

[medi1977]

That's ok , it is not that company - I will delete it anyway but company in question is clothing company not my own company which is on my profile.

The relationship with the new owner has not totally broken because I do other work for them, it is just tricky for them as they dont want to put money in to make up the shortfall that is offered by the new buyer.

Could I resign as Director and affectively say "well I tried to get you the new buyer but you declined and I do not wish to be responsible for bank debt"

 

[john1989]

What will resigning as a director do? You're name would still be on the guarantee.

 

[UK Contractor Accountant]

Has the new owner given a guarantee to you or to the bank.

If his aware that you are in the frame for the bank borrowings he might just let it go to the wall and let you tough it with the bank for repayment.

Don't think resigning puts in you in a strong position- in fact weakens your position as you maybe cut off from access to the bank account and reports.

 

[medi1977]

I have a signed agreement between me and the owner that he guarantees the overdraft, which I in turn originally guarantee with the bank.

So essentially I am back to where I was originally to stay as the Director and see it through that the new owner takes over, but it doesnt resolve who deals with the shortfall owed to the bank,.

 

[UK Contractor Accountant]

you might consider buying back yourself for £7K and then deal with this without having to account to the new owner.

 

[medi1977]

The potential taking over owner, has clothing contracts in place so can make better use of it, it would be no use me buying it back from the existing owner , as I would need £40k operating costs to just start again with clothing brands.

The deal I have been trying to facilitate is that the potential new owners buys it for £7k and that I stay on with my 15 year knowledge to help him with product buying. in exchange for 3% of sales.

I just need to get the busy existing owner to see this deal through and realise the longer they keep hold of it the less value it will be,.

 

[UK Contractor Accountant]

What I meant was a back to back deal if the new owner does not play along.

You buy then immediately resell to the buyers you have lined up.That gets the owner out of the loop and gives you total control of the size of the debt subject to guarantee.

 

[medi1977]

I'm not sure I understand your suggestion

I have contacted around 20-30 potential buyers, but they tend to backout once they find out the level of commitment required to make it work with clothing brands from scratch, the advantage of the buyer I lined up for the existing owner is that they already have significant online prescence and clothes accounts to take this on.

Amazon has killed off the individual retailer market for this type of clothing, so it would only suit a buyer established independantly with decent clothing contacts and larger customer base.

 

[Paul Kelly ICHYB]

'the owner did sign a guarantee against my guarantee when buying the business' - how legally tight is it? See a solicitor and bill the company!

He has you by the short and curlies!

How do you value the domain at £10k? What are the sales?

Sadly, you may need to prepare to take a £2k bath.