Offer to Purchase my 50% shareholding of company

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pat2468

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I have a 50% shareholding in a Ltd business. I have now left the business to start a new career(2 weeks ago). Due to unforseen circumstances my fellow director was not available to agree transfer of shares before i left. Current business performance. Retained profit €80k. some bad debts to consider (-10k). Break even last two years. Difficult trading conditions due to market sector.
My fellow director has proposed the following

"Devalue the company to €21k under the following headings

Net Asset Value
Less
Market Value adj on Fix Assets
Market Value Adj on Stock
Bad Debt provn on debtors

Revised Company Value
Apply 50% Minority Discount Adj (30%) (9)

NET VALUE

therefore i get 50% of new valuation.

I have a good relationship with my fellow director and i want the company to continue. The fact is the company makes little to no profit and turnover is approx €500k is not great.
I am aware the companies valuations can differ depending on who is looking at them but am i getting short changed here?
Also i am still a personal guarantee on the company overdraft & c/c's. i know this is crazy but it couldn't be sorted before i left. The bank will not let the current director sign off on the guarantee on his own. Is this normal?

I would really appreciate any comments how to proceed.
thanks,
 
How realisable are the assets? If the retained profits are €80k, the net assets should be around €80k. If they could be collected or sold for €60k, you would be better off liquidating the company and pocketing €30k.

Do you have to sell your shares? If not, you should probably keep them until the overdraft is cleared. When it is cleared, then you should get free of your guarantee. How much is your guarantee for?

As you have a good relationship, you might suggest appointing your auditors or some independent party to value your share. The valuation would have to be binding. If it was for €30k, could your fellow shareholder afford to buy you out?

Brendan
 
Brendan, the valuation of €80k is simply the book value of the assets. If you look at the adjustments referred to in the OP, it appears the debtors, fixed assets and stock are all worth less than book value - apparently to the tune of ~50k which reduces the net asset value to 30k.

The OPs share is half of this, but since it isn't a majority share, it is reduced (by 30%), to 11.5k.

So as long as the adjustments to stock, fixed assets and debtors are correct, then the valuation may be reasonable, and liquidating, with the associated costs, will not exceed this.

Unless of course there is Goodwill to be factored in (unlikely since the business is only treading water).
 
I think Mandlebrot has covered most of the basis. Its quite normal to
draw up an adjusted balance sheet when a company is being sold to (adjust book value to market value.)

The one figure that is missing for me in the overall valuation process is salaries. The business is apparently breaking even but presumably the salaries of the directors is the one that will be hugely important in arriving at a valuation
 
A good relationship with a fellow director will count for naught if he doesn't have to share any information/knowledge of the business with you - which might concern you if the business went downhill after you stepped away, but still were liable on account of your personal guarantees.

Get those sorted first. I imagine the holder of those guarantees will be reluctant to let you slip away, so you may just have to liquidate to be safe. (How many stories have we all been reading where guarantees come back to haunt years later?)
 
All,
sorry about delay. If i go down the liquidation route than that means the company closes, which i want to avoid?
The company made profit for 2-3 years, after write off's over the bad years the retained profit is €80k. I expect more write offs this year which would leave retained profit of €60-65k. which i feel is pretty realistic but the other director want the value at €21k. surely revenue will query this and have an issue with it?
If the company buy's back my shares (which the existing director is proposing) than what will i pay as a % in tax.
the director salary's were small, due to market conditions.
Should i just agreed a figure somewhere in between and work the figures around that. I want to avoid a long negotiation process.

appreciate any comments
 
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