Small solvent liquidation

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Facts:

  • Referred by: Accountant
  • Industry sector: Leisure and farming
  • Successful family business
  • Parents retiring and handing over to two siblings
  • Siblings want to work separately

Background

Family had run a successful farming business for years and more recently had built up a successful business in the leisure industry. The children, a son and a daughter, had acquired the shares a while ago. The son had concentrated on the farming and the daughter on the leisure business. They wanted to separate out the two businesses going forward.

The problem

Over the years the value of the assets, both tangible and intangible, had risen considerably so any sale would attract substantial capital gains tax and stamp duty land tax liabilities. Despite being very different businesses they had historically been accounted for as one business with the same profit and loss accounts.

The solution

The perfect solution for this is a Section 110 of the Insolvency Act 1986 reconstruction. This would enable the parts of the business to be valued and packaged up into two limited companies which could be distributed in specie to each sibling as the 100% shareholder of their own separate company.

The difference

We understood the need for both siblings to come out of this feeling equal. We consulted with farming agents, valuers and lawyers as well as with their own accountants in order to value the businesses to come up with two equal parcels. Not an easy process to give fair value to two different types of property including the matrimonial homes and profit potential in the two businesses. Both companies are now trading successfully in their own right and the parents have a relaxed retirement.

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