Sole Trader giving leasehold business assets away to a Limited Company

crysys

Hi, my partner has had no luck with selling his business. To save him the trouble of folding it, he has offered it for free (including all assets) to another business owner, in the same field. I believe this owner is a limited company, owning one business already. The lease can easily be re-assigned by the lessor, the local council, using their solicitors. Does my partner have to use his own solicitor to transfer the assets or can he rely on his buyer’s solicitor to do any necessary paperwork. He’s already been stung by a solicitor over a failed sale and doesn’t want to involve another if he doesn’t need to.

Jeremy535897

Your facts do not add up. You talk of a company owning assets, but then assigning a lease and transferring assets. All your friend needs to do is transfer his shares in his limited company to the other business owner, or his company. He also needs to resign any positions he holds in his company (director and/or secretary) and ensure any personal guarantees he has given (perhaps to the bank and/or the council re rent) are cancelled. Personally, I would want to involve a solicitor to ensure everything was done properly, unless he knows there are no personal guarantees etc.

DullGreyGuy

Was your partner operating as a sole trader or limited company?

There is no legal requirement to have a solicitor for advice but clearly you can find yourself in hot water with no one but yourself to blame if you dont understand all the ramifications of what you are signing and any loopholes etc.

In theory the solicitor could be instructed to act as transaction counsel and therefore a more neutral party but that would only normally be done if the costs are being shared... why'd the buyer agree to pay for your legal advice?

martindow

As the business has assets and some value, I think I would make the transfer conditional on the recipient covering your solicitor's fee. 

Annisele

If your partner is a sole trader and owns a commercial lease, then it's possible that if the transfer of the lease is defective somehow he'll end up still on the hook to pay money.

It's not always beneficial to own a commercial lease - sometimes the obligations that come with them cost more than they're worth. Those obligations aren't just rent; sometimes they include repairs and other costs.

So, if your partner attempts to transfer the lease but the transfer is ineffective, your partner might be pursued for money later. If he's sure that he understands what he's passing on, and he's sure that the transfer is binding, then he won't necessarily need a solicitor. But it might still be wise to use one.