Defered Payment

[locutus]

I bought a business last year, and the seller and I, agreed a deferred payment on the business (I won't bore you with the indepth details), to be repaid over 1 year. The year is up now.

Over the last year, through various means, nearly all of it has been repaid through various methods. However, after paying rent, VAT, staff, council tax all in the last 30 days, it left the account pretty empty of pennies. In the contract of sale, the full price was listed, with the deferred payment included.

I asked the seller if we could spread the payments out over a few months, and I would pay a little bit of interest on it for the inconvenience. Their response was they needed to close everything related to that side of the business down by end of April, or they would have to "incur another year of filing fees". This should have been accounted for in financial year 18/19, not 19/20? Surely some accounting trick could be done to show that the deferred payment had been paid?

The business I bought was being run through a LLP, and I just bought the assets, the lease, staff, etc. They kept the LLP. I'm not 100% certain, but I believe they could be trying to close the LLP down.

I have spoken to one of their business associates, who is much more familiar with the seller's financials than I am (but isn't privy to the innerworkings), and has said there is no reason why as far as they know why the deferred payment couldn't be delayed a few months. But again, as the associate isn't privy to the innerworkings, they couldn't give a proper answer. The associate feels that the seller is just being difficult, for the sake of it. I wouldn't be surprised at all - they are that kind of person.

The contract doesn't say anything about what happens when the deferred payment is not paid in full by the end of the 12 months. If their "filing fees" are reasonable, I don't mind paying them.

Any help would be appreciated!

 

[WaveJumper]

I bought a business last year, and the seller and I, agreed a deferred payment on the business (I won't bore you with the indepth details), to be repaid over 1 year. The year is up now.

Over the last year, through various means, nearly all of it has been repaid through various methods. However, after paying rent, VAT, staff, council tax all in the last 30 days, it left the account pretty empty of pennies. In the contract of sale, the full price was listed, with the deferred payment included.

I asked the seller if we could spread the payments out over a few months, and I would pay a little bit of interest on it for the inconvenience. Their response was they needed to close everything related to that side of the business down by end of April, or they would have to "incur another year of filing fees". This should have been accounted for in financial year 18/19, not 19/20? Surely some accounting trick could be done to show that the deferred payment had been paid?

The business I bought was being run through a LLP, and I just bought the assets, the lease, staff, etc. They kept the LLP. I'm not 100% certain, but I believe they could be trying to close the LLP down.

I have spoken to one of their business associates, who is much more familiar with the seller's financials than I am (but isn't privy to the innerworkings), and has said there is no reason why as far as they know why the deferred payment couldn't be delayed a few months. But again, as the associate isn't privy to the innerworkings, they couldn't give a proper answer. The associate feels that the seller is just being difficult, for the sake of it. I wouldn't be surprised at all - they are that kind of person.

The contract doesn't say anything about what happens when the deferred payment is not paid in full by the end of the 12 months. If their "filing fees" are reasonable, I don't mind paying them.

Any help would be appreciated!

The agreement you had was to repay the seller in one year, I am not sure why you think he would give you an extension, personally I don't think his accounting situation is any of your business. Maybe the underlining problem is not enough proper due diligence was done in the outset and the business was never going to generate enough funds to pay the agreed asking price.

 

[locutus]

Hi Wave

If the positions were reversed, I wouldn't be too thrilled about being asked for an extension, but I would be reasonable. If it was the only way to get the money from the buyer, and the buyer is going to give me a little bit extra, then why not. I feel it's important to be reasonable in these situations. I've been extremely reasonable to the person I bought the business from despite their attitude towards me. Too long to go into details here, and not relevant.

Yes, the the business was not generating the cash the seller had said. Yes, I am fool for buying this business. Yes, it's not my business to know their financials, but I'm allowed to ask, just like they are allowed to ask my business associates about me.

 

[WaveJumper]

I think we can assume that this seller is not going to be reasonable, so the question is what other avenues are open to you: The question I think you need to ask yourself is this business a going concern, its sounds like you have some turnover coming in but not quite enough, sit down and have a long hard look be realistic. Depending on the sums and the sums required to pay this person off is it worth seeking a loan form bank, or even family etc, although you do not want to go down this route if the numbers do not work.

If the company was to close tomorrow who stands to loose the most, is the debt on the company or you personally, are you LTD or sole trader are personal guarantees in place?

I am sorry to say the old seller obviously knew the numbers and he may very well be worried now he won't get his money back if you fail in the coming year. I am sure a lot of other members here will jump on this as the morning progress's and hopefully have some more thoughts on the way out. In the meantime have a long hard look at those numbers. good luck

 

[MJ Holohan]

Without looking at contracts etc.. you would be expected to pay in line with contract. You say the business is not making what the client says. Did the client make representations that you based your purchase on? This could be worth looking at.

 

[NickGrogan]

I feel it's important to be reasonable in these situations

A reasonable person sticks to agreements.
A reasonable person would have known weeks/months ago they would not have enough money at the end of the year and made other arrangements.

The seller is asking you to be reasonable.