www.iva.co.uk

I found out yesterday that my stepdad has debts of around £80,000 which have been built up over many years.The majority of these were built up prior to us starting is business together.

3 Years ago we both setup a limited company,he has 51% and myself 49%. Both are directors. I funded the company from the start and its now doing well. We both drawer a small percentage of sales at the moment which has worked out well and i have recently taken the majority of the money that i put into the company out.

There are also other family problems that mean i may have the ask him to step down as director and for me to be the sole shareholder in the company.He has spoken to an IVA company and they are aksing for company details etc so that things can progress. He hasnt done this yet as he doesnt want to get the company involved as he realises its his own debt and not the company but i believe that the creditors wouldnt see it that way.

There is little cash in the company but we have a warehouse with around £50k worth of stock and no property or other significant assets.Just a very good business model.If i ask my step dad to resign as director which he would be happy to do and possibly take him on as an employee would this be frowned upon by the IVA / creditors?

Would the company assets be safe with me and not part of the IVA or a potential future bankruptcy?Another option i have considered is buying his share of the company after he resigns for a figure calculated by the company accountant.

I'm very very confused and concerned about which is going to be the best route to avoid the company getting entwined in his debt problems.If i keep him on as an employee only with a reasonable salary he may be able to make payments of say £500 - £600 month over 5 years (earns £1500 - £2000 month) but if he slips up on payments a couple of years down the road and is forced into bankruptcy i want to try and make sure that the company is protected.

Is bankruptcy not an option whilst he has this income?

Sorry I cannot answer your question but stick around and an expert should be along shortly.

Good luck and best wishes xx

hi and welcome to the forum!

i am not an expert but i am sure one will be along to advise you

barb x

There is no problem in asking your Stepdad to step down as a director and then employ him as an employee - but his shareholding in the company will have to be valued and treated as an asset in the IVA if you are going to acquire this from him - and you will need to get proper valuations. Your Stepdad's IP is also bound to want to see the company accounts to see if you can sustain paying him a salary, in order to fund his IVA payments.

You are wise to want to protect the company into the future, but must remember that if the company has value now then his creditors are bound to want to have a share of that in either an IVA or a subsequent bankruptcy. Perhpas your own accountants could help you with this.

Thanks Melanie. I will speak with the accountant today and try and find out if the IVA is likely top value his share of the company at the value of the assets or the value of the future earnings. I'm not sure of this.

If i legally buy his share of the company via the accountants guidance before the IVA process proceeds any further is there anything his IVA can do to stop this? I'm not sure if he has signed anything yet but if the value of the company is just boxes of stock in the warehouse which in the case of bankruptcy i think this would be the case then if i offer the IVA 50% of the nett value of the stock at the moment are they likely to seriously consider that? I dont want them to have a claim of any of the future growth though or i wont let the company grow. I am lucky in that i have a well paid job in addition to this business so despite being extremely busy I'm not dependant on this business which can be proven.. There is nothing stopping me stopping marketing the company and driving it into the ground in the months ahead due to my main income from elsewhere. If i shut the company down and opened it up again in my own name with a new limited company name would that not be another way i could proceed? I built up the company and my step dad is fully supportive of this and he will go down whichever route i suggest to protect the company from this mess as the guilt must be terrible. I could also speak with the IVA anomonously and outline the scenario do you think? I cant help but think that there must be a loophole somewhere to avoid his ceditors getting their hands on his 51% of the company? Any other advice from posters would be greatly appreciated.. I hardly slept last night so need to get some plan clear in my head very soon..

Sorry - I don't give advice on loopholes or trying to reduce the value of assets in order to take them away from creditors. I suggest you get the company properly valued and then make a sensible offer to your Stepdad for his shares.