In a lawsuit, can your SPV Ltd Company directorship be claimed?

[Trooper149]

Just wanting to know my risks. I work as zn off payroll employee in my industry, which makes the whole liability aspect a bit of a grey area. The fact that the work is dangerous but pays well, makes it worth it. I can't set up as a Ltd company in my industry due to IR35.

Going to be buying a property soon, and have plans to purchase it under a Special Purpose Vehicle Ltd Company, so that its protected in the unfortunate chance, a claim is made against me.

As the question mentioned, would doing the above protect my property from being claimed against in a lawsuit?

T

 

[Frank the Insurance guy]

I assume you will have shares in the SPV - if so I'm sure these shares will be part of your assets and will therefore be in the mix if a claim is made against you.

 

[Trooper149]

I assume you will have shares in the SPV - if so I'm sure these shares will be part of your assets and will therefore be in the mix if a claim is made against you.

Thanks for replying, and apologies for the delay in getting back.

Possibly I might have shares. Is it possible to be an owner and director, but only have say 1% of the shares? I'd essentially want to maintain as close to absolute control as possible over the firm, but hold as few assets from the firm (to avoid them being claimed).

Thanks
T

 

[Frank the Insurance guy]

If you only have 1% in shares, i doubt you will absolute control, as I would think the other 99% would have any deciding voting rights - you need some professional advice on this.

I suggest you speak to a financial and tax advisor on this as they may come up with a suitable solution. They may recommend putting the property in a "trust", but much will depend on how much control you want, whether you are likely to sell the property in the future and the additional costs involved compared against the security/safety you are seeking.

 

[NWH]

By its very nature, an SPV must be distanced from the sponsor both in terms of management and ownership, because if the SPV were to be owned or controlled by the sponsor, there is no difference between a subsidiary and an SPV.

 

[2020Lawyer2020]

If you only have 1% of the shares then if a personal claim is made against you then only your 1% shareholding is up for grabs. However if you are some kind of disguised controller of the SPV or the 99% of shares are held on trust for you then there is a new legal obligation for the trust to be registered and things a bit more complicated.

 

[Trooper149]

If you only have 1% of the shares then if a personal claim is made against you then only your 1% shareholding is up for grabs. However if you are some kind of disguised controller of the SPV or the 99% of shares are held on trust for you then there is a new legal obligation for the trust to be registered and things a bit more complicated.

When you say "on trust", do you mean held by an actual Trust company or "in trust" by a e.g. a family member?

Something I have considered, is just set up the SPV, purchase the property, and then completely transfer ownership to a family member. They would, by all legalities and paperwork, be the owner, and I would be a former owner. I would have no place in the company. Ofcourse, I would be asking them to do this for me as a "personal" reques. Once I have done what I need to do with regards to my job and leave the sector, I would then kindly ask said family member to transfer ownership of the SPV back to me.

Would doing this, protect the SPV? I assumed it would, as I would have nothing to do with it.

 

[Trooper149]

By its very nature, an SPV must be distanced from the sponsor both in terms of management and ownership, because if the SPV were to be owned or controlled by the sponsor, there is no difference between a subsidiary and an SPV.

Technically, and SPV is a separate entity from a standard Ltd company, in the sense that, if you take out a mortgage or loan under an SPV, then this is held against the credit rating of the owner (even though, you still have the benefit of being shielded by the Ltd status of the SPV). If your SPV was to go to ground, then despite having Ltd liability, your credit rating would be harmed.

 

[Trooper149]

If you only have 1% in shares, i doubt you will absolute control, as I would think the other 99% would have any deciding voting rights - you need some professional advice on this.

I suggest you speak to a financial and tax advisor on this as they may come up with a suitable solution. They may recommend putting the property in a "trust", but much will depend on how much control you want, whether you are likely to sell the property in the future and the additional costs involved compared against the security/safety you are seeking.

A hypothetical question for you: if I was to transfer full owner and director ship to a family member so they could fully "hold" the SPV for me, would the mortgage for the properties under the SPV, still be held against my personal credit rating?

As I understand it, an SPV, despite being Ltd, holds its mortgages and debts against your credit rating. As a result if the SPV went bust, while perhaps nothing can be collected from you as the company is Ltd, your credit rating can still be harmed.

In my case, I have considered setting up the SPV, purchasing the property, and then handing the SPV over to a family member completely. Obviously, I would be doing this with complete trust to the family member (I do trust them), but my main concern is that it doesnt affect their credit rating. Only mine.

Maybe I should check with a financial advisor as you suggested.

 

[Frank the Insurance guy]

They would, by all legalities and paperwork, be the owner, and I would be a former owner. I would have no place in the company. Ofcourse, I would be asking them to do this for me as a "personal" reques. Once I have done what I need to do with regards to my job and leave the sector, I would then kindly ask said family member to transfer ownership of the SPV back to me.

They would be the legal owner - no legal obligation to hand it back and nothing you can do if they say "no"! Be very careful if doing this.

purchase the property, and then completely transfer ownership to a family member.

Be careful as you may end up having to pay Stamp duty. Your family member may be liable for tax on the "gift" and pay stamp duty. You may then then be liable for stamp duty and tax on the "gift" from the family member when reverting ownership back.

Maybe I should check with a financial advisor as you suggested.

Definately!



Sorry but the more I read this, it comes across as a but "dogdy" - if something was to happen and an investigation took place, you may find that whatever you have done may not work if found to be for the purposes of deliberately avoiding something!

 

[Trooper149]

They would be the legal owner - no legal obligation to hand it back and nothing you can do if they say "no"! Be very careful if doing this.


Be careful as you may end up having to pay Stamp duty. Your family member may be liable for tax on the "gift" and pay stamp duty. You may then then be liable for stamp duty and tax on the "gift" from the family member when reverting ownership back.


Definately!



Sorry but the more I read this, it comes across as a but "dogdy" - if something was to happen and an investigation took place, you may find that whatever you have done may not work if found to be for the purposes of deliberately avoiding something!

Cheers for the replies.

It may seem like that, but ultimately my industry (construction) is full of dodgy characters and situations as there are some that will deliberately put themselves in harms way or cause harm to themselves, if they think they can make a claim/have the resources to manufacture a claim. I can safely say that I am not one of these types, though I have to take precautions to protect myself from such unscrupulous behaviour.

Transferring ownership to this family member of mine is no problem to me as its in their interest to not screw me, and if they did, then I know what my plan would be.

Anyway, best get to contacting a financial advisor.

Thanks!

 

[dylanmarlais]

You can set yourself up as a limited company and protect your assets. It’s possible to continue working through a limited company even if your current contract is deemed to be within IR35. You’ll need to ensure you pay the correct PAYE tax and National Insurance (NI) for any contract which is inside IR35 because you are, in the eyes of HMRC, an employee. You can, however, manage this through your limited company.