Case Study: Family-Ownerd Food Retail Company

Family owned food retail company - business owned and operated by 2 brothers

Challenges:

•    Brother A  wished to retire from the business and take his value out in a tax efficient manner
•    Brother B did not want to retire and wanted to continue the business
•    The remaining  Brother B  did not have personal funds to buy him out so needed to raise funds through the business
•    Client knew what the end objective was but did not have a plan to get there
•    Differing opinions between the brothers on the value of the business and the ideal timescale  for Brother A to retire

What we did:

•    Understood the individual brothers  personal objectives and concerns, in conjunction with their personal financial adviser
•    Undertook a valuation of the business and assessed the feasibility of borrowing  funding externally using our contacts in the banking sector .  We were able to test the feasibility of a deal at an early stage.
•    Working with tax consultants and the personal financial adviser developed a plan and transaction structure to allow one brother to exit the business in a tax efficient manner. Minimising the capital gains tax charges on him and on the company, being  mindful  of not over burdening the company with debt and ensuring the retiring brother received the required level of capital and income in his retirement
•    Co ordinated the process in conjunction with 2 sets of solicitors our role as “lead adviser” ensured the transaction progressed as quickly as possible and any hurdles or issues were resolved expediently.

Result:

•    The company borrowed sufficient funds from a bank to buy back Brother A’s shares  and to pay a substantial pension payment to him.
•    Brother A retired as planned with minimal tax payable on his capital sum
•     Brother B now owns 100% of the company and is developing  and growing  the business with his wife as a fellow director.