Private Company Shares in Bankruptcy

Silvio Dante

Registered User
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127
Hi,

Technical question

I have recently been discharged from bankruptcy
In my original SOA I disclosed shareholdings in three companies
Two have subsequently been wound up
However, one is still trading

What information I can gather is that it is not profitable and is paying down a good bit of debt very slowly but it might be profitable within two/three years providing the bank continues to support.

I have never received a cent in dividends or anything in 7 years (gave an initial investment at start up of about 5% of company).

To the best of my knowledge the OA has never contacted the company to look to sell the shares and tbh I doubt they'd have got anything.
The proprietors know me and would be appreciative of my initial investment so it's doubtful they would have agreed to pay anything for my shares.
No one else would likely touch them (usual stuff, too much uncertainty, still debt involved, unprofitable to date etc).

Anyway
Anyone any idea what happens form here?

A decent guy I know says he thinks it's similar to family home.
If it cant be sold for a profit for creditors it has to revert after a period.
?
 
Our general advice to clients about to enter bankruptcy with small shareholdings is to sell them (for market value) before hand, as it can be expensive to deal with the Official Assignee after bankruptcy adjudication. The Official Assignee can insist on Independent Valuations, and the whole process becomes costly with more correspondence with solicitors and accountants etc.

Generally a small minority shareholding of 5% would have limited value. However, it could have substantial value if there are, say, just two other opposing shareholders with 47.5% shareholdings each and one of them wishes to obtain majority control.

Under the standard Articles of Association adopted by most companies prior to the Companies Act 2014, the Official Assignee automatically steps into the shoes of the bankrupt shareholder.

In practice, a 5% shareholding has practically no value for most SMEs, so the OA is unlikely to have interest in them, as the costs of valuing them and selling them would outweigh the benefits.

Jim Stafford
 
Thanks Jim,

On basis of above, should I ask the OA to revest the ownership and/or when he would be prepared to do so?
I've found certainly during bankruptcy, letting sleeping dogs lie strategy is usually best but now discharged I don't want the shares to stay with the OA endlessly if possible.
it's only a long shot even long term they will yield anything but better than nothing

On same subject, are you aware of any time limit for disposal of shares and or forced sale?
 
Should the other shareholders offer to buy the shares from the OA?

If the company isn't worth very much, they could send in the accounts and make a small offer. If the OA rejects it, fine.

Brendan
 
I'd imagine they would be ok to send in accounts and/or show the company currently has little or no value but the OA rejecting it would not be fine, that's what I am trying to head off and trying to get it back or at worst let it back to company.
I don't want the OA as a shareholder for years to come and I doubt the company does (although at present it makes little difference)
 
On basis of above, should I ask the OA to revest the ownership and/or when he would be prepared to do so?

You should know yourself how complex your bankruptcy was, and how long it will take the OA to complete. If the bankruptcy was straightforward, he might finish up the bankruptcy shortly without selling the shares, in which case they would re-vest back to you.

On same subject, are you aware of any time limit for disposal of shares and or forced sale?

There is no time scale (unlike a family home which must be sold within 3 years.)

If you ask the OA to sell them now, it could cost you a minimum of €4,000/€5,000 to cover his legal fees, accountants fees etc and to achieve some "net" realisation for the creditors.


Jim Stafford
 
Hi folks,

My wife and I plan to go bankrupt probably in Jan 2017. We have a company in our joint names that is a start-up company but which has not sold anything - nor is likely to for the foreseeable future.

Would it be best just to close it prior to bankruptcy - or - what would happen to it during bankruptcy as we're not allowed to be directors of it during bankruptcy?

It will have certain debts to outside creditors which will not be able to be repaid.

Cheers!
 
Everything depends on the medium term/long term outlook for the company.

If the company has a future, then you should sell the shares now and appoint new directors.

If the company has no viable future then you should liquidate it now.

I would mention that the Companies Act 2014 imposed new "fiduciary" obligations on directors. Whilst these have yet to be tested before the Courts, you do not want to be discharged from bankruptcy to find that a creditor/investor initiates legal proceedings against you for not acting "honestly and responsibly".

Jim Stafford
 
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