Selling Company with BBL

sukhshant

If I sell the company with BBL Loan and do the sale and purchase contract. Will I still be liable to pay the BBL or the new director will be liable for any kind of debts acknowledged in the sales dead.
Second if the bank refuse to add new director in the bank account for some reason, who will be liable to pay off or will be approached.

As per my understanding if the company is sold realistically all the debts and liabilities will be liability of new director.
Please suggest
Thanks

Sandtree

Not seen any of the BBL Loan terms but was the loan exclusively to the company or were any director guarantees required?

If its just the company then there is no "transferring" everything remains the companies and its just the shareholder of the company that changes.

Director guarantees would add complexity.

Grumpy_chap

sukhshant said:

If I sell the company with BBL Loan and do the sale and purchase contract. Will I still be liable to pay the BBL or the new director will be liable for any kind of debts acknowledged in the sales dead.
Second if the bank refuse to add new director in the bank account for some reason, who will be liable to pay off or will be approached.

As per my understanding if the company is sold realistically all the debts and liabilities will be liability of new director.
Please suggest
Thanks

I assume that the business you are selling is your Ltd Co. and not your sole-trader business.

For the purpose of valuing the business for sale, any assets and liabilities are taken into account.  In this context, the BBLS is like any other loan - if the value of the business would be £100k (based on multiple times EBIDTA or whichever other valuation method is used) and the BBLS is £25k, then you either get the £100k and you redeem the £25k loan from the proceeds of the sale of the business, or you receive the £75k and the new owner is liable to settle the loan.  How the loan is settled will be written into the legal documents for the sale.

Are there any restrictions in the BBLS agreement that prevent the loan being transferred?

Even without the loan, valuing the fair price for the business is a complex process.  Then there will need to be clauses that cover stock, cash in bank (which varies daily), etc., etc.

Really, this is too complex for a public forum as there are so many complex and intertwined variables that determine the value of a business and how to sell it, that you have to rely on your professional advisors for the sale.  Have you appointed these?

Sandtree

Grumpy_chap said:
Are there any restrictions in the BBLS agreement that prevent the loan being transferred?

Assuming no directors guarantees then the Loan isnt being transferred... the debtor is ABC Limited presale and ABC Limited post sale... just the shareholder of ABC Limited changes

Grumpy_chap

Sandtree said:

Grumpy_chap said:
Are there any restrictions in the BBLS agreement that prevent the loan being transferred?

Assuming no directors guarantees then the Loan isnt being transferred... the debtor is ABC Limited presale and ABC Limited post sale... just the shareholder of ABC Limited changes

Except that BBLS did not permit personal guarantees to be required.
We are assuming that the OP is looking to sell the business ABC Limited and not OP sole-trader business trading as ABC.

Either way, the OP needs to appoint professional advisors to guide the sale process and maximise the value of the business.

If the OP has a business in difficulty, simply selling won't resolve the liability as no competent buyer will ignore the value of the loan in the valuation of the business.

sukhshant

Sandtree said:

Grumpy_chap said:
Are there any restrictions in the BBLS agreement that prevent the loan being transferred?

Assuming no directors guarantees then the Loan isnt being transferred... the debtor is ABC Limited presale and ABC Limited post sale... just the shareholder of ABC Limited changes

The company is Ltd. Well with your statement "Assuming no directors guarantees then the Loan isnt being transferred". if the shareholder is changed. who will be liable to pay the BBL, the new director or old director or it is companies loan it will depend on new director shareholder how to settle the BBL and not the old one

Grumpy_chap

sukhshant said:

The company is Ltd. Well with your statement "Assuming no directors guarantees then the Loan isnt being transferred". if the shareholder is changed. who will be liable to pay the BBL, the new director or old director or it is companies loan it will depend on new director shareholder how to settle the BBL and not the old one

The loan is attached to the Ltd Co.
If the shareholder is changed, the liability to repay the loan remains with the Ltd Co., and the duties of the Ltd Co. are discharged by the Directors of the Ltd Co.
The shareholder can change but not the Director, or vice-versa.
The new shareholder will take into account the value of any liabilities (including the BBLS) as part of their valuation of the business.

What valuation methodology is being proposed?

Have you appointed your professional advisors to guide the sale of the business?

sukhshant

Grumpy_chap said:

sukhshant said:

The company is Ltd. Well with your statement "Assuming no directors guarantees then the Loan isnt being transferred". if the shareholder is changed. who will be liable to pay the BBL, the new director or old director or it is companies loan it will depend on new director shareholder how to settle the BBL and not the old one

The loan is attached to the Ltd Co.
If the shareholder is changed, the liability to repay the loan remains with the Ltd Co., and the duties of the Ltd Co. are discharged by the Directors of the Ltd Co.
The shareholder can change but not the Director, or vice-versa.
The new shareholder will take into account the value of any liabilities (including the BBLS) as part of their valuation of the business.

What valuation methodology is being proposed?

Have you appointed your professional advisors to guide the sale of the business?

I understand the Loan is attached to the Ltd Co, so the Share holder will change, The director will also change as the new director will be added and the old directed will resign completely from the company,
I did not understand this "The shareholder can change but not the Director, or vice-versa.".

Yes all valuation method has been considered but I have not taken a professional advice. However I have got the Sale purchase order ready mentioning these lines in the order

1. Upon the terms of this Agreement, the Seller agrees to sell with full title guarantee and the Buyer agrees to purchase the Shares with effect from the Completion Date.

2. The Seller hereby warrants, represents and undertakes to the Buyer that the Company has outstanding debt of £XXX owed to Bank. (loan agreement attached.)

5a. The Seller hereby transfers all her rights and liabilities regarding the company, its shares and accounts to the Buyer.

Grumpy_chap

sukhshant said:

I understand the Loan is attached to the Ltd Co, so the Share holder will change, The director will also change as the new director will be added and the old directed will resign completely from the company,
I did not understand this "The shareholder can change but not the Director, or vice-versa."

The Shareholder(s) owns the company and receive income as dividend.
The Director operates the company and receives income as salary package.

The Shareholder and the Director can be the same person or can be different people. 
It sounds as though in your case, the same person (OP) is Shareholder and Director and it is proposed that a different person (B) is to become the new Shareholder and Director.  That is simple and common, but not always the case.

I am not going to comment on the proposed form of contract for the sale of the business as I am not qualified to make even passing comment.  This is important and you really do need to take professional advice - at least pay a Solicitor to review the document and protect you from the worst risks.

Sandtree

sukhshant said:

Sandtree said:

Grumpy_chap said:
Are there any restrictions in the BBLS agreement that prevent the loan being transferred?

Assuming no directors guarantees then the Loan isnt being transferred... the debtor is ABC Limited presale and ABC Limited post sale... just the shareholder of ABC Limited changes

The company is Ltd. Well with your statement "Assuming no directors guarantees then the Loan isnt being transferred". if the shareholder is changed. who will be liable to pay the BBL, the new director or old director or it is companies loan it will depend on new director shareholder how to settle the BBL and not the old one

The company is liable to pay the loan as its the debtor

Directors act on the companies behalf because a company is an non-natural person so cannot physically do things for itself. There are many laws surrounding the duty of a director to the company, the company to the shareholders etc, though some of this can be overwritten with articles of association etc. This is why shareholders can get rid of directors etc and the company has an AGM etc.

As its a limited company a shareholder's liability is limited to the nominal value of the shares they hold which may or may not already be paid up. 

Sandtree

PS... this is taking the comment at face value that you are selling the company itself; businesses can be sold in multiple ways some of which dont actually sell the company itself. 

If you sell all the assets but not the company the value paid goes into the company, not to shareholders, and the liabilities remain. Assuming assets outweighed liabilities and there is no intent to continue trading it would then be a case of settling liabilities, winding up and distribution of any assets left to the shareholders.