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Buachaill
Buachaill, Barrister
Category: Law
Satisfied Customers: 10536
Experience:  Barrister 17 years experience
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I have an asset in a limited company that is worth circa

Resolved Question:

I have an asset in a limited company that is worth circa £500k . I have a mortgage on it of £480k I am the only share holder of the company , but there are two directors. It has an option agreement on it to a third party to purchase at £500k.
If I am made Bankrupt what will happen to the asset ? Will the appointed Trustee be interested in it?
Submitted: 11 months ago.
Category: Law
Expert:  Buachaill replied 11 months ago.

1. A limited company is a separate legal entity to you. So, if you go bankrupt, it will not affect the property worth 500k which is owned by the limited company. This is because you don't own the asset. The trustee in bankruptcy cannot get his hands on the asset as you don't own it. However, you do own the shares in the limited company, so the trustee in bankruptcy will attempt to put a value on the shares and attempt to sell those shares to realise value for your creditors in the bankruptcy.

Expert:  Buachaill replied 11 months ago.

2. Accordingly, whilst you don't own the asset worth 500k, you do own all the shares in the company and the trustee in bankruptcy will attempt to realise the value of these shares. Indirectly, this puts the asset at the mercy of the trustee in bankruptcy.

Expert:  Buachaill replied 11 months ago.

3. Please Rate the answer as unless you Rate the answer your Expert will receive no payment for answering your question.

Customer: replied 11 months ago.
Thank you for your response.
The company has an option agreement dated around twelve months ago for around 500k . It is the only asset of the company so I cannot see how the shares could be worth more than this less the mortgage?
I also have an independent valuation done around 6 months ago for a bridging company that came in at £460K.
If I sold the company for £500 k would the trustee be able to overturn the sale?
Customer: replied 11 months ago.
The option agreement is to sell the asset.
Expert:  Buachaill replied 11 months ago.

4. If you sell the company for market value the trustee in bankruptcy cannot subsequently impugn the sale. However, it should be an arm's length market value sale. However, there is no restriction on what price your company sells the asset because it is not your asset. So if there is an option agreement for the sale of the asset, that can go ahead. However, the option should be exercised before you go into bankruptcy.

Customer: replied 11 months ago.
Thanks
Would it be possible for the third party to exercise the option by taking on the debt which is equivalent to the value?
Expert:  Buachaill replied 11 months ago.

5. Yes, assumption of a debt liability is good consideration (or value) for a property. so, it is perfectly possible for the third party to exercise the option by taking on the debt which is equivalent in value.

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