Buying in house in Ltd Co - asset protection

00ec25

Peterjones2018 wrote: »

I think the concept involves setting up the limited company, prior to any litigation commencing. It's a defensive strategy. Yes, you would be bankrupted by the litigation, but the property would be out of reach of the litigants, as it belongs to a limited company, not you the one being sued.

wrong.
you own the company lock stock and barrel
the company is worth £x: the value of the asset it owns, a property.

your personal net worth in bankruptcy comprises a) what you have in the bank and b) the value of shares you own. Bye bye bank account, bye bye your ownership of the company.
You are making the classic mistake of all newly forced to be PSC directors, you don't understand the relationship between you and the company.

Peterjones2018 wrote: »

Obviously, you would have to resign as a director, following the lawsuit. But you'd still have access to your house. That's the theory anyway.

there is no obviously about it. The new owners of the company may decide to sell it. Your occupation of the property is as a tenant of the company. The new owners merely have to evict you, which, on average, would take 5 - 9 months to get to the point of a bailiff knocking on the door ...

mind you there could be a positive about being forced out, depending on how the company financed the purchase, it may end your benefit in kind liability for income tax as the director & occupier

Peterjones2018 wrote: »

I'm not wholly convinced by this strategy. But it's being marketed and advocated, so I thought I would find out other people's opinions.

so you are an (unwilling) PSC contractor (join the club!) but it is not clear what you are trying to protect against

you talk of "litigation": by whom? for what?

the obvious is job related - so that is why the work has been done by a Ltd Company. However, have you actually understood all the clauses in your professional indemnity insurance policy and have you read all the terms of your banker's covenant? Might there perhaps be a "director's guarantee" in place?

the less obvious is for your personal actions:
1. That is why the sane add legal cover to their household insurance.
2. The less well informed think that their net worth comprises a complete misunderstanding of the value of the shares they own in their own company

if you think you can hide your house from personal bankruptcy then think again:
http://www.independent.co.uk/news/business/news/ten-years-after-lloyds-of-london-scandal-investors-face-new-threat-of-financial-ruin-45905.html

ThePants999

Stupid question time. There's talk here of being a tenant, where the company is the landlord. That makes sense. So what about formalising it? Have the company grant you a fixed term tenancy of significant length, with no break clause. Then the company can't evict you just because someone else takes it over. Feels like there must be a flaw in this plan, but what is it?

AdrianC

ThePants999 wrote: »

Stupid question time. There's talk here of being a tenant, where the company is the landlord. That makes sense. So what about formalising it? Have the company grant you a fixed term tenancy of significant length, with no break clause. Then the company can't evict you just because someone else takes it over. Feels like there must be a flaw in this plan, but what is it?

It won't see you being evicted, sure.

But it WILL still see you losing ownership of the property. You can continue to have that rubbed in your face by remaining there if you wish... and if you think the new landlord is going to be taking much care over the maintenance and upkeep of the property... Whether that be your creditor who took it over in lieu of your debt when you were bankrupted, or whether it be whoever they sell it to cheaply at auction to cut their losses. Remember, you can't bid, because you're bankrupt so can't raise the funds.