Buying and selling a company – Management Buy Out
Introduction
We were asked to advise on a tax efficient way for the Founders to hand over control to an existing employee and minority shareholder. The Founders wanted to have a minority stake in the business going forward.
The Issue
The minority shareholder did not have the funds to purchase the shares outright from the Founders. As an existing employee, we also had to consider the Employment Related Securities legislation.
How we solved it
A Newco was formed which acquired all the shares in the trading company (“Oldco”). The minority shareholder exchanged shares in Oldco and the Founders exchanged their shares for a combination of cash, loan notes and shares in Newco.
The outcome
The cash consideration and redemption of loan notes was funded from the future profits generated by the trading company enabling the employee to end up with a majority shareholding for a relatively small financial commitment.
Next Steps
Do you want to hand over control of your company? Do you want to ensure this is done in the most tax efficient way? Contact us and our team of expert tax advisers will be happy to guide you.
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