A long long time ago and in a different galaxy, there was only one way to sell a small business. We called it the “asset deal”.
In essence, the company stayed intact. The assets required to run “the business” moved to a new company, replaced in the old with cash.
Assets to run the business:
Debtors, creditors, cash (or not)
Customer and supplier lists
Brands, domains, communications, etc
Basically everything needed to carry on what the business does.
Of course, some of it becomes the subject of negotiation. Things like buying cash, excess stock, the owner’s car, bad debts, and so on.
In return, the company, not the owner of the company, receives the cash. For the owner to get it, the company must first pay capital gains tax and then deduct dividends tax. That all gets very expensive.
But the deal was safe for the seller if he had personal sureties in place. The new company with the business in place would have to open all its own accounts with suppliers and banks. There was no risk of the account holders ever coming for their securities.
And safety was important to the purchaser too. What if the company had provided security for the shareholder’s daughter to buy her car? It happened.
Anyway… So here we sit with a shutdown doing a bit more than just threatening every business in the country. CIPC promises to be lenient on directors of insolvent companies. Big hairy deal! The company will still be insolvent.
And that brings us back to the whole asset deal thing. You see, the business is part of the company. And in the current state of disaster with Covid19 and the lock-down fall-down, things are going to get messy for the companies.
A lot of companies are going to get themselves liquidated. That means the company has no value. It does not mean the business has no value. As any small business owner knows; things get done to survive.
Your business can survive without the company
Your business can resurrect itself before, during, or after Easter. And as times improve (and they will) your business will be ready to rock and roll. Yeah, your registration number will change. And you’ll have to open new accounts (so be careful here).
And you must not prefer any creditors over others, so be careful here too. Except perhaps your staff. Look after those guys. You’re gonna need them on the other side.
But you know what? My readers, clients, and friends have been on this journey for too damned long to have their valuable assets taken away because of a bug in the system.
You guys are resourceful. That’s how you got this far. Make it work. The country relies on you, as ungrateful as it may seem most days.Back to Blog