Company Takeover - Business Bank Account Transfer Questions and Seeking Advice

[saltandpepper]

Hello All,

I hope everyone is doing well and thriving in their respective ventures.

I am on the verge of an exciting development in my career. I'm taking over a company very soon and, as with all such transitions, there are a few logistic and financial considerations to manage.

One of my primary concerns at the moment is related to the company's business bank account. Currently, it's held with Barclays. I am trying to get a sense of how long the process of adding me to the account or transferring it entirely to me is likely to take. Does anyone have any first-hand experience with this process at Barclays or any other major bank? Your insight would be immensely valuable.

Another point of concern is the potential credit check by the bank. Can I expect Barclays to conduct a personal credit check on me in the course of this transition? If so, how comprehensive is this check likely to be, and is there anything I should prepare for or be aware of in this regard?

Finally, the company currently has an overdraft facility with Barclays. While I am not planning to use this overdraft, I believe it's always prudent to have that extra financial cushion available in case of unexpected circumstances. In your experiences, is it common for banks to maintain the overdraft facility during an ownership change, or should I be prepared for the possibility of losing this feature?

I would greatly appreciate any advice, experiences, or insights you may have to share regarding these matters. Also, if there are any other key considerations that I may have overlooked related to the banking aspects of a company takeover, I would be grateful if you could bring them to my attention.

Thank you in advance for your time and expertise. Looking forward to our productive exchange.

Best Regards,

 

[Mark T Jones]

Presumably there is a 'story' behind the credit check question?

The nature of the story will influence the outcome.

They will undoubtedly review the overdraft facility - the story will play a role in whether they renew it or not.

 

[saltandpepper]

Hi Mark,

Thank you so much for your response. Your insight on the credit check and overdraft review is very helpful.

As for your question, there isn't any specific 'story' behind my concern about the credit check. The reason I asked was due to the seller mentioning that the bank may have some queries about the new owner as part of their routine due diligence. This would be entirely understandable, but it did spark some curiosity on my part, hence the question.

As I'm stepping into the shoes of the current owners who have significantly more personal wealth than myself, I am conscious of how that difference may be perceived. The company I'm taking over is a multi-million-pound entity, and the current owners are indeed very affluent. This difference in personal financial standing has left me wondering whether this might influence the bank's assessment in terms of extending the overdraft facility to a new owner.

I realise this is a bit of a nuanced situation, and it's hard to predict exactly how things will play out. But any further advice or experiences you or others on this forum might be able to share in this context would be greatly appreciated.

Thank you once again for taking the time to respond to my initial query.

Best Regards

Presumably there is a 'story' behind the credit check question?

The nature of the story will influence the outcome.

They will undoubtedly review the overdraft facility - the story will play a role in whether they renew it or not.

 

[Ozzy]

Assuming the overdraft is secured on the business itself and not a personal guarantee, it is less likely to be an issue but the bank may require some diligence (or require a regular review of the company performance under new management).
If the new business owner does have any poor credit history then the bank may choose to withdraw the facility.

Whether the business owner is affluent or not isn't so important, it's how the business finances are managed and how the business owner manages the funds they do have will be more important to the bank.

 

[Mark T Jones]

Do be aware that overdrafts are renewable annually and are repayable on demand. The latter starts to happen when the economy gets tough and banks get nervous.

Other than that, as @Ozzy says, it really depends on how the overdraft was originally underwritten/agreed.

 

[kulture]

It is important to note that it is the COMPANY’s bank account and not an individual. What you are doing effectively is changing the signatories on the account. It is clearly essential that previous directors are all removed.

If it is in my experience a complete nightmare getting Barclays to correctly change signatories.

If it is a multi million pound company, presumably it has a board of directors and accountants. I would assume that there are multiple employees in senior positions who are signatories.

What does your accountant say about the ease of dealing with Barclays?

 

[Gyumri]

@kulture is correct about ensuring that all the existing signatories are removed from the bank mandate.

I would think about opening a new bank account without an overdraft but it seems to me that you need to see a solicitor if you are going to be handing over wads of money for shares.

it's hard to predict exactly how things will play out.

Then you ought not to be going ahead unless you and your advisors know exactly how things will play out.

 

[Porky]

@saltandpepper
Personally, I would work on the basis that all banks are crap and next to useless and unlikely to do FA to support and take an eternity to sort out the mandate changes. As that’s the reality in the majority of situations. So assume the worst and overdraft immediately or within short time pulled. The existing overdraft could have a PG of one of the existing directors attached, that’s the sort of thing Barclays do.

I’m with @Gyumri and would open my own new business bank account. on updating the PSC at companies house and appointing new directors If it was me I would be simultaneously open a new business account elsewhere on the new basis. You can always close it later if Barclays come up trumps

Some of the ex banking lot here will no doubt disagree with my negative bank comments but in my years of experience of banks imo they only respect you if a) you have significant cash balance with them or b) you have significant debt with them that they can’t catch a cold on.

Good luck

 

[Paul Kelly ICHYB]

It is important to note that it is the COMPANY’s bank account and not an individual. What you are doing effectively is changing the signatories on the account. It is clearly essential that previous directors are all removed.

Thats important.

Depending on the business, if you plan to change banks, do not do that for anfew months after the new one is created. Customers also tend to be slow in changing back details, so ensure that the old account stays open to get funds without delays.

 

[Newchodge]

As I'm stepping into the shoes of the current owners who have significantly more personal wealth than myself, ****. The company I'm taking over is a multi-million-pound entity,

I realise this isn't the question you asked, but have you had full legal advice on what you are doing? If so, you should be directing this question to your solicitor. If not, I suggest you pause everything until you have taken legal advice.

 

[WaveJumper]

Personally I would have asked present owners to set up meeting with bank, especially if the turnover is a significant as you suggest, have them explain to their “business banking manager” what’s going on behind the scenes , and of course introducing your good self at the same time. With that sort of turnover going through the account they should put the wheels in motion getting the necessary paper work in place for getting your signature on the account.

Again as others have mentioned if other personal have the ability to sign off money, obviously review this, however if not already in place make it so all transactions have to have two signature‘s, you can always change this later if you wish

 

[The Resolver]

Can I be a bit boring and just check whether, when you say you are 'taking over the company', you are indeed buying all the shares of the limited company or just the business and its assets.

Assuming you are buying the shares, follow Wavejumpers advice to ask them to set up a meeting with the Bank. Everything will flow from that. You can even include some bank focused clauses in the Sale and Purchase Agreement e.g. to allow for completion delay if the Bank do not give a green light.

Oh and don't forget to inform the bank of your politics!