Avoiding liability

28 January 2014

Issue: 4437 / Categories: Forum & Feedback , Capital Gains

The shareholder directors of a financial services company wish to sell it in such a way that their sale proceeds will qualify for capital gains tax entrepreneurs’ relief without passing on the contingent liability of future claims

The four equal shareholder/directors of a financial services limited company which has traded for many years are planning a sale. Naturally they would like to ensure that the sale of their shares qualifies for capital gains tax entrepreneurs’ relief.

They are in early negotiations with a corporate buyer who will buy the shares but it does not want to take over the contingent liability of possible future claims. How can this be achieved because surely if the shares are sold the liabilities remain with the company?

If the purchasing company buys my clients’ shares their company will be a 100% subsidiary of the corporate purchaser. Can the trade then be transferred to the acquiring company leaving the contingent liabilities behind in the subsidiary?

Alternatively are there any other strategies that will achieve the same objective?

I am assuming that my clients’...

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