CLIENT CHALLENGES

The founding shareholder was spending significantly less time in the business and building a management team to take over the running of the business from him.  He was looking to pass ownership and control to them as part of this succession plan, and also to release some of his capital accumulated in the business over many years, which would enable him to clear personal debt and help his family financially.  

He wanted to continue to reduce his time in the business but not exit completely, immediately. He was conscious that the management team and minority shareholders would not have sufficient financial backing to buy him out, was also keen not to hurt the company’s cash flow or credit rating, and wanted to ensure he didn’t expose himself unnecessarily to inheritance tax, by securing a large payout for his shares.

OLDFIELD'S SOLUTION

Oldfield identified a way to achieve the founding shareholder’s objectives, releasing a proportion of capital in the company, enabling the management team to buy him out of company cash reserves and future profits, meaning they did not have to find personal funds or extract large sums from the company as dividends.

The transaction was structured as a partial buyout, valued at £1.7 million, allowing the founder to remain involved at a reduced level, and paid in instalments so as to minimise the burden on the company’s cash flow and credit rating.  The unpaid funds were held in a way that maintained business relief from inheritance tax.

RESULTS

The results speak for themselves:  the founding shareholder released £1.7 million of his capital at a 10% tax rate, over a timeframe that was mutually suitable for him and the company, whilst minimising the burden on the continuing shareholders by utilising company funds in a staged approach that prevented negatively impacting the company’s cash flow and credit rating.

Brief Overview

INDUSTRY
Healthcare

KEY CHALLENGES

• Need to facilitate succession to new management team.
• Desire to release capital from founder’s shares.
• Need to achieve this from company funds without negatively impacting continuing shareholders or the company.

ONE SOLUTION
Company restructuring to release shareholder's funds, utilising company reserves, with founding shareholder retaining a reduced share of the business.

RESULTS
Realising capital of £1.7million, paying tax at 10% on this amount, enabling management to utilise company rather than personal funds whilst preserving company’s cash flow and credit rating. 

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