looks like my business will be expanding

[jas]

I am currently in an IVA where i pay 50% of my profits to creditors. I am currently self employed and it looks like my business will be expanding quite a bit in the next year or so. I am looking to take on a partner and incorporating the business.
Question 1 - can you confirm that there is no restriction on me being a co director.
Question 2 - IF i pay myself a salary from the company which is at my current level (therefore pay creditors the same 50%) will the creditors be able to have any sort of right to the retained profits within the company.

[MelanieGiles]

Hi jas and welcome to the forum

There should be no restriction on you taking on a co-director, but if you are going to issue shares you will need to bring this to the attention of your IP as you will be effectively giving away an asset.

If you pay yourself a salary from the company, this is unlikely to affect your IVA, as the salary becomes income, which will be assessed by your IP and your end of year profits will reduce accordingly. The creditors will still have the right to 50% of your remaining business profits.

Check this out with your own IP, as an IVA based solely on 50% of earned profits seems a little odd to me.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[jas]

Thanks for the info but could you just clarify. When you say creditors still have a right to the remaining business profits do you mean the retained profit sitting in the company which has not been distributed.
If that is the case, condidering that i may only be a 50% shareholder would'nt this unfairly impact the other shareholders.

[MelanieGiles]

Hi again

Can you confirm the level of shareholding that you currently hold. I may have incorrectly assumed that you hold all of the shares.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[jas]

Its a theoretical question at the moment although i am hoping to be a majority sharholder say 80%. Would my level of shareholding effect the amount of retained profit the creditors would have a right to. If that was the case would it be beneficial for myself to only hold a small shareholding.
Basically i want structure the company in order that the creditors have minimal right to any profits the company makes, whilst maintaing the amounts i am already paying to them by taking a similar salary from the company that i earn now as a sole trader.

[MelanieGiles]

Jas

Who will be the other shareholder(s) and how much will they be paying in for their stake? If you only take an 80% share of the profits, then you will only be entitled to 80% of the profits - but it would be unwise to take a smaller shareholding as your IP will see that as potentially manipulating profits away from your creditors. The suggestion in your last paragraph confirms that this is what you want to do, and I cannot concur with that as it is not in the spirit of your IVA or the best interests of your creditors.

I now feel that you should speak specifically to your own IP about your plans and seek suitable case specific advice.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk