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  1. #1

    Default Commecial building - sale of shares to co-director

    I am intending to sell my 50% shareholding to the co-director of a company which owns a commercial building.

    Are there points that I should consider other than the fact that, as it will be an off-market sale, there will be no fees and commissions associated with a real estate agent.

    Any points of view will be appreciated.

    JCMK

  2. #2
    Join Date
    Mar 2015
    Location
    Brisbane Wellington Auckland
    Posts
    655

    Default

    Quote Originally Posted by jcmk View Post
    I am intending to sell my 50% shareholding to the co-director of a company which owns a commercial building.

    Are there points that I should consider other than the fact that, as it will be an off-market sale, there will be no fees and commissions associated with a real estate agent.

    Any points of view will be appreciated.

    JCMK
    Get your name released from the bank PG

  3. #3
    Join Date
    May 2007
    Location
    Hamilton
    Posts
    3,451

    Default

    Tax - If there is Imputation Credits in normal company, these will be lost. Or if you have losses to carry forward, these will be lost.

    So suggest get accounting/tax advice from your accountant before transfer, as might be smarter ways to do it, or might need to declare dividends first.

    Both of these affect the co-director more than you.

    Ross
    More Profit from Property? TEACH ME MORE
    Ross Barnett - Coombe Smith Property Accountants
    Proud to give the best property advice for over 13 years.

  4. #4

    Default

    Showing my ignorance here - what is the bank PG?

    JCMK

  5. #5

    Default

    Many thanks for that info.

    Further query - how do we reach a 'fair value". The decision to sell my shares in the company is due to an acrimonious situation that has developed where I am not prepared to have a "open cheque book" to consent an area in the building for which the tenant pays only $1250/annum.
    The price for my 50% share holding in company would give the co-director a passing yield of 8.3%.
    I am not selling because I have another investment that I wish to persue, but because of the situation that has developed and legal costs involved.
    So for the interim I would probably deposit into a term investment with a yield of roughly 3.5% - 4%.
    Would this disparity on yield be taken into account for reaching a "fair value"?

  6. #6
    Join Date
    May 2007
    Location
    Hamilton
    Posts
    3,451

    Default

    Hi jcmk,

    Normally you would get the property or properties valued.

    Then probably your accountant would work out the net value of the business and therefore the value of your shares (ie valuation plus any other debt less debt including shareholder or related party advances, GST, income tax etc).

    The shareholders would then need to agree a value.

    Ross
    More Profit from Property? TEACH ME MORE
    Ross Barnett - Coombe Smith Property Accountants
    Proud to give the best property advice for over 13 years.

  7. #7

    Default

    Thanks Ross for the info

    The other party has forwarded their offer based on:

    1) the adjusted equity of value of the shares subtracted from the
    2) Shareholder loan account

    Is this basically what you are referring to above.

    In their calculations they have also adjusted the "market value" of the building by subtracting the "selling costs" including supposed agent fees, commission and legal fees. Legal fees I can understand but agent fees and commission I would have thought would not enter the equation.

    Property value - is this based on a registered property valuation, or a value that a real estate agent thinks/feels the building would achieve on the open market.

    The shareholders would then need to agree a value. I'm assuming the company accountant would work out the value of the company and then any difference in what each shareholder thought was the value of the shares, would depend on their independent valuation reports.

    I do have a meeting with my commercial solicitor later this week, but it is good to get an understanding of what will be discussed.

    Many thanks
    JCMK


 

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