Minority shareholder retires selling equity

Case Study6th Apr 2020

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Our Client 

Becoming increasingly remote in company operations, the minority shareholder of a long-established fishing company expressed his interest to exit the company and retire.  

The remaining company shareholders wished to purchase of the shares and at the same time wind-up an existing Partnership in order to consolidate operations. 

AAB were approached to advise on how to tax efficiently to achieve the above objectives and ensuring that no more than a fair market value was paid to the exiting shareholder. AAB were responsible for project management of the transaction to completion. 

Our Approach 

  • Negotiated an exit price with the exiting shareholder using our Corporate Finance team’s expertise in undertaking company valuations 
  • In relation to the company, we liaised with HMRC to gain Advance Clearance for the purchase of shares from the minority shareholder, ensuring the disposal would qualify for Capital Gains Tax treatment, achieving an efficient tax position for the exiting shareholder 
  • In relation to the Partnership, we confirmed the most efficient way to allow for the winding-up, including identification of the tax reliefs that were available 
  • Prepared a valuation for the Partnership and the Company, including the fair market value of the fishing operation consisting of vessels, Fixed Allocation Quota units and licences along with considering the value of minority shareholders’ interests 
  • Lead the implementation and project management of both transactions, including supporting the existing accountant with cessation accounts for the partnership 
  • Reviewed all legal documentation as prepared by lawyers, to confirm these were effective from a tax perspective and achieved the desired objectives and outcomes 

The Outcome 

  • Peace of mind for all parties that a fair market value was paid for the shares acquired from the minority shareholder 
  • Consideration given to all taxes including Capital Gains Tax, Income Tax, Corporation Tax, Inheritance Tax and VAT to ensure the transactions were as efficient as possible 
  • By project managing the transactions, we allowed the shareholders to focus on the “day-job” during the COVID-19 pandemic, ensuring all parties, including other professional advisers involved in the transaction, were aligned towards the key objectives and deliverables, allowing for the transactions to be completed in a timely manner 
  • AAB’s expert tax team highlighted practical steps that could be undertaken now to minimise tax liabilities in the future covering Capital Gains Tax and Inheritance Tax 

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