Exiting a Business

[Rupert Pupkin]

I need some help on exiting a business.

We have a business that is owned by 2 parties.
A and B

A wants to exit
B wants to acquire it.

A own 84%
B owns 26%

B cannot raise the capital to pay for A's 84%. It has been agreed that A could take the value of the business from the free cash in the business. Approx. £100,000. Leaving in trading capital.

How can A take the money out of the business without B taking their equivalent proportion? Could B waive their rights to the 26% via a formal agreement? What would this look like?

Thanks.

 

[DWS]

I need some help on exiting a business.

We have a business that is owned by 2 parties.
A and B

A wants to exit
B wants to acquire it.

A own 84%
B owns 26%

B cannot raise the capital to pay for A's 84%. It has been agreed that A could take the value of the business from the free cash in the business. Approx. £100,000. Leaving in trading capital.

How can A take the money out of the business without B taking their equivalent proportion? Could B waive their rights to the 26% via a formal agreement? What would this look like?

Thanks.

How is there a 110% shareholding?

 

[MikeJ]

Assuming a limited company, the company does a share buy-back.

Speak to a lawyer. Be cautious of any personal guarantees you've provided

 

[Clinton]

There are several routes to this. For example, the company could lend B the money. You then have a Director Loan problem, of course.

The company can buy back shares from A. But that's not going to be to the extent of 84%. Besides, there are various rules around share buybacks that could scupper this plan, the retained profit issue being just one of them.

There are other routes.

But the most sensible would be for B to borrow the money. I'm concerned with the fact that this is not possible. Why isn't it possible? Is it because no lender will see the value in the business that B sees?

I think B urgently needs to get professional advice. TBH, A needs to also get professional advice. Preferably a different adviser to the one B is using.

Your 84% + 26% (110%) numbers suggest a lack of attention to detail that doesn't bode well for any DIY attempt at what is not a simple transaction.

 

[Rupert Pupkin]

Hi Guys,

Appreciate the feedback.

Shares are 86%/14%. Typed in error above.

Both businesses have legal representation but I'm trying to understand the options they are going to come to the table with ahead of time.

 

[Rupert Pupkin]

There are several routes to this. For example, the company could lend B the money. You then have a Director Loan problem, of course.

The company can buy back shares from A. But that's not going to be to the extent of 84%. Besides, there are various rules around share buybacks that could scupper this plan, the retained profit issue being just one of them.

There are other routes.

But the most sensible would be for B to borrow the money. I'm concerned with the fact that this is not possible. Why isn't it possible? Is it because no lender will see the value in the business that B sees?

I think B urgently needs to get professional advice. TBH, A needs to also get professional advice. Preferably a different adviser to the one B is using.

Your 84% + 26% (110%) numbers suggest a lack of attention to detail that doesn't bode well for any DIY attempt at what is not a simple transaction.

B has maximised it's external funding capacity to acquire another business. It's quite complicated beyond what I explained above but I tried to simplify it to get to an answer.

 

[Clinton]

Ah, the simplifying of matters in order to get simple and quick answers?!

Professionals absolutely love that because when you screw up they will charge you double their normal fee for you to get half the benefit you would have had if you used them from the start instead of seeking advice in forums.

Both businesses have legal representation ...

B has maximised it's external funding capacity

A & B are businesses, not people? I give up! Good luck, Rupert.

 

[Socio South West]

Good to see your no nonsense common sense back on the boards @Clinton

 

[fisicx]

@Rupert Pupkin - are A and B directors?

If so it’s easy. A resigns as a director and keeps the shares. When B has the funds they buy the shares from A.