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Business valuation(7 Posts)
Sorry to start another thread . . . It's just a very different question.
Is it possible that a company that my husband owns 51% of has a value of £0, when he has been consistently been paid dividends of at least £10,000 a month?
Short answer - no. Get a joint expert to value the business and provide a report to the courts.
What is his business? Is it essentially just him self employed and that if he stopped there effectively is no business or is it a ‘proper business’ with tangible and intangible assets, customer lists, contracts in place, goodwill etc ?
Get a copy of the financial statements inc the balance sheet
You can go down the Forensic Accountant route at a cost of £5000 to £10,000 but the fact is that if he owns 51% of the shares someone else owns 49% of them. A Judge isn't going to do anything that impacts on the other shareholder, i.e. insist on a share transfer to you. It is also considered a "fragile asset" and valuations are very difficult. It may be making good money now but that doesn't mean it will be making any money by Christmas. A Judge will recognise that he probably has a healthy income stream going forward and give you a larger slice of the remaining pie. The business is also the goose that lays the golden egg in terms of child support, maintenance etc so ultimately whatever your accountant comes up with won't get you anywhere. The question is, how bigger slice of the remaining pie will you get?
I was in this situation with my husband of 23yrs. He valued his business as £0 when he had just paid himself 2x dividends of £250,000 in the space of 3 months bridging 2 Tax Years! And bought himself a £950,000 home behind my back!!!
However my solicitor couldn't guarantee that the cost of a Forensic Accountant would ensure I got a better payout. I had to let it go so that I could stay in my family home
A company cannot pay more in dividends than the profit it has made for the current of previous years (retained earnings) (https://www.companydebt.com/articles/should-you-take-a-dividend-as-a-director-of-a-limited-company/)
In order to pay a dividend, the company must have been profitable and must have the cash available on balance sheet (or have raised sufficient funds) to pay it.
A profitable company that is not in administration (it is solvent and a going concern) will have a going concern value. You can look up the company name in Companies' house and check it is not in the gazette (where administration are listed) and what its latest accounts look like (its profit) www.gov.uk/get-information-about-a-company
The valuation will depend on its profitability, prospects, historic trading, forecast trading, management team and a range of other factors. Typically a business is valued as a multiple of its operating profit e.g. for an small business running a care home that does not earn its own property this could be c. 6.5x Operating Profit Before Depreciation and Amortisation (EBITDA). Another method of valuation is looking at the forecast cash flows and calculating what they would be worth today (Discounted Cash Flow method)
You would usually engage a valuer (a small local accountancy can help) to prepare a fair market value. Valuation can also be determined by putting the business for sale.
Unless the company is in administration, it is unlikely to be worth 0.
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