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08 September 2015
Will the release of a personal guarantee increase the value of shares?
Our client is proposing to sell his company. The balance sheet comprises the following:
- Assets: £500 000.
- Bank debt: £450 000.
- Other debt: £50 000.
The shareholder has agreed to sell the entire share capital for £1 because the company has no value. The purchaser will provide funding to replace the current bank debt. However our client the present shareholder personally guaranteed the entire bank debt.
Upon the sale of the share capital could it be argued that it should have a deemed value of £450 000 because he is now capable of walking away from the bank debt and the personal guarantee?
I would be grateful for advice from Taxation readers on whether I am overlooking something...
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