Limited freehold company property safe from bankruptcy

Fraise

This is a strange question but I was out with friends tonight and we started discussing properties. To cut to the chase the subject got around to share of freeholds and turning them into limited companies. Someone piped up and said that besides all the obvious benefits of having a limited company instead of plain share of freehold, is that if one of the flat owners who was also a director and shareholder of the freehold company went bankrupt, their flat could not be touched by the creditors.

Surely that cannot be right? The flat would have a lease too so surely the creditors could force a sale?

CKhalvashi

You can't be a director, or have any large amounts of shares (in value) in bankruptcy, so this wouldn't work.

The property would be safe from bankruptcy, but the shares wouldn't, if that makes sense.

CK

Guest101

Its just like any other asset, the person goes bankrupt, the creditors arent going to take the bri ks from the house. Its just as if he sold it on

Fraise

Thanks fr your replies but I'm still confused? Sorry. So if you were to turn your SOF into a limited company, and owned say one third of the shares, including the 999 year leasehold to your individual flat inside the property, if you went bankrupt or just owed money some years down the line, can the creditors not force you to sell the leasehold of the flat?

Guest101

Fraise wrote: »

Thanks fr your replies but I'm still confused? Sorry. So if you were to turn your SOF into a limited company, and owned say one third of the shares, including the 999 year leasehold to your individual flat inside the property, if you went bankrupt or just owed money some years down the line, can the creditors not force you to sell the leasehold of the flat?

yes they can, in either case, but it doesnt affect you at all

CKhalvashi

They would take the shares in the company from you, to be sold at market rate.

It's not as simple as any property being immune from personal bankruptcy, as it wouldn't be.

CK

propertyman

The problem is that you dont have share freehold, no such thing.

You own your flat on a lease of x years

You and the others jointly own the freehold together like in simple terms Mr & Mrs or A & B, not bits, or a share of freehold flat- again doesn't exist.

Whether in a company or joint ownership, any assets that a bankrupt has are subject to bankruptcy proceedings.

If home ownership is protected their interest in the freehold or freeholding company is not.

Where held by a company it is common that the ownership of share or membership is restricted to a flat owner(s) which prevents a thrid party becoming involved ( unless they take the flat)

The biggest problem with joint ownership is that there is usually lack of a formal agreement managing the group especially where there is disagreement.

In a company the articles provide that and when it comes to selling the flat and removing you and introducing the buyer into a group is simplified by the transmission of a share or membership, and not every member of the group have got to sign the transfer for the freehold and a consent to assign for the flat :eek:


As usual with such chats people dont know much about the subject hope this helps :rotfl:

http://leaseholdpropertymanager.blogspot.co.uk/2013/07/i-have-share-of-freehold-no-you-dont.html

Fraise

It's strange, because the person who told me this insisted that a limited company meant no-one could take any assets from that limited company if you were to get into debt.

propertyman

Well thats what I have said, the concern is the control of that asset. As membership is limited to flat owners they might depending on the insolvency arrangements obtain the rights to vote etc.

Its important though where the freehold has substantial value and the membership has not been limited that the share could pass into a creditors or buyers hands.