Make the most from your business when selling your share in a management buyout, which will see you comfortably into retirement

Looking to sell your business, for any number of reasons, can bring any number of challenges. You have sacrificed a great deal along with having invested blood, sweat and finances into your trading company, building it up, and over the years of profitable trading, it has become more successful than you could have hoped for.

But now it is time to release the capital for your retirement, or your next venture. Sometimes though, for no particular reason, a traditional management buyout may not always be feasible. So, what can you do?

It might be worth approaching ATO/HMRC with a proposal which works both for you, and for your business, allowing you to retire and for the business to continue to grow.

In his article, How to release capital without a management buyout Paul Draper, Tax Partner at Clarke Nicklin suggests, “Before everyone spends a lot time on anything, contact ATO/HMRC for tax clearances on a proposal to set up a new company.” This new company you set up, will effectively purchase your share of your original company, allowing the management team to slowly buy you out over a period of time.
Paul goes on to say, “The new company purchases shares for the agreed amount, for example £1 million, payable as £200,000 in cash, the issue of a £800,000 loan-note redeemable over four years, and 5% of the share capital of the new company.”

As director of the new company, you agree to retain 5% of the new company, receiving ongoing sensible director’s remuneration; while the management team takes control of the remaining 95%.

This essentially allows your original company to continue trading while you retire, passing control of your original business to your management team who can call on you for day-to-day advice and experience – if necessary. But ultimately your original business, which you have invested so much in to, is able to continue trading whilst paying out the agreed amount to you, from the profit the business generates.

Loan-notes, can be flexible to suit you and your original business, and should build in some commercial protection for you during the agreed payment period, just in case your business encounters any trade difficulties.

Ian Innerd, Founder and Director of Identify Executive with over 16 years’ experience consultancy for business acquisition, explains, “Identify Executive is an advisory firm for those looking to sell, acquire, or merge practices. Finding the best solution may involve long-term strategic planning, so that what you have built up can continue to grow – especially if you have the next generation of your family involved.”

Contact Identify Executive to understand how to avoid third party costs, and how to keep your business afloat, even through a management buyout.