To not want to get involved in business with my mother?

[Pioneer]

My mum is in a bit of a financial mess at the moment, mainly due to bad business decisions by her husband (who she is in business with), though she admits that she is not blameless.

She is in the process of separating from him, and they are trying to sort the financial side of it out.

Anyway they own some commercial properties, one that is leased out, two that they run borderline successful businesses from, and one that is empty.

Her soon to be ex-H has agreed that she can have all the businesses and properties if he can keep the business that he runs.

Anyway, I had a call from my mum the other day to say that she wants to open the empty one as a cafe/restaurant as it is quote "haemorraging (sp) money".

She says that she wants to put all the properties/businesses jointly into her name, my name and my sister's.

I can't help but have reservations about this, as it appears that they are on the verge of bankruptcy.

I really feel sorry for my mum, and when things were going better she always helped us out financially (though we never asked for anything).

I'd do anything to help her, but I don't know much about financial or legal matters, and I feel really apprehensive about putting my name to anything.

Would I be correct in thinking that if it is only the property that my name is on, that it will not pose such a risk?

Pretty confused about it all, but also don't want to offend or upset my mum.

I don't know much about the legal side of this, but tbh I would be very wary about getting involved in business with family members anyway, even if there wasn't an apparent risk of bankruptcy added on. Why does your mum say she wants to put things in your name (and that of your sister)? Is she seeing it as a gesture of family loyalty, or because the financial woes for her will be lessened? To me, that makes a difference.

Basically she inherited a lot of money from her mother - she had wanted to give some of it to me and my sister, but her DH thought it would be a better idea to invest it, as according to him "the girls don't need the money" .

Anyway because it is now all invested in the businesses, I think she is worried that she will lose everything and we will get no inheritance, so she thinks that if she puts it in our names, then we will already have it IYSWIM.

I completely agree with you LucyLouLou - I think the reason there is such a mess in the first place is because they're all in bed together (commercially speaking of course!), as both my sister and BIL work for my mum and her DH.

I just don't want to upset her by saying "No, I don't want anything to do with it".

Also, and this is really sad, there is a small part of me that thinks there is perhaps an ulterior motive in the putting it in our names.
Please let me be wrong .

Aren't restaurants the number one business for going bust? Sounds a bit throwing good money after bad.

Does she own the building outright? What are the property taxes like?

I'm confused as to how an empty outright-owned building can be haemorraging money...

Sorry, I misunderstood your first post. I think you'd need to check the legalities of it all - but I think if she transfers the properties in to your name whilst "knowing" that the business is going under then technically it could be fraud. :(

Well, if she wanted you to have the money, she should have done it.

If you´re named on the businesses, aren´t you also liable?

She´s surely putting your name on the business that she is intending to run, not just an empty property?

Yes SkiHorse, I had thought that about restaurants too and I told her that but she says she has to try and make some money as they are struggling to meet the repayments on interest only mortgage.

They don't own outright - they have one big loan that covers all the properties, but they also have some capital.

Sorry no idea on property taxes.

Basically what I need to know is: If the properties are in joint names with her/me/my sister and she goes bankrupt, will they try to recover any money from me or my sister?

Yes! On an interest only mortgage they'd come after you for ALL the money! By putting the property/mortgage in your name you are liable! IO means that NOTHING is getting repaid and with property prices falling... how much "capital" do they have in there to not leave you in negative equity.

I'm sorry but from my (limited) pov there's only one way this is going to end and personally I wouldn't touch it with someone else's!

Thanks for your advice - that's kind of what I was thinking but I just don't know a lot about it.

She is quite persuasive, and she keeps saying stuff like "I can get us through this, I just need your support - do I have it?" I told her that she has my support in terms of emotionally, but that I cannot give her any financial support.

Do you think it would be wise to get some official legal advice? (Can't really afford it, but if needs must)

I'm really not too sure on figures, but I am sure that the reasons that they are not selling the properties is because it would leave them with negative equity.

I just don't want anything to do with it at all.

Hi Pioneer, this is something that I actually know a bit about as I am a lawyer specialising in corporate matters (i.e. businesses) with a particular emphasis on insolvency.

Without knowing exactly how the businesses are run (does your Mum own a company through which the properties are operated, or does she own them in her own/joint names?) it's difficult to be precise.

You asked "Would I be correct in thinking that if it is only the property that my name is on, that it will not pose such a risk?"

If the properties are owned by your Mum personally/jointly with her husband, it is true to say that if your name simply goes on the title deeds, there is not as much risk as becoming involved in a company that your Mum is running.

You mentioned that there is a loan secured on these properties. It's possible that the Bank will not want your name on the title deeds without any record of running a business yourself. There's probably a clause in the loan and/or security documents saying that your Mum won't give anyone else an interest in the properties - i.e. that she won't put your name on the title deeds, so your Mum would need to check that as well.

If the Bank does agree to you going on the title deeds/becoming party to the loan, you may find that you are on the hook for the amount owed, either because they will ask you to agree to be jointly liable with your Mum or because they want a personal guarantee from you, possibly backed up with security on your own home if you own it. You mortgage company would need to agree to this as well.

If your name is on the title deeds, there may be liabilities associated with the property that you are liable for - for example if there is some sort of leak from the property that causes damage to neighbouring land or businesses, you might be called upon to pay for any damage.

If your Mum runs the businesses as a company, you should absolutely not agree to become a director or get involved in the running of the company if you can help it - particularly if you know that the business is already in trouble. If the business fails and you are a director or have been involved in running it, you could find yourself on the hook for the liabilties of the business, possibly even those that were run up before you came on board.

It's a bit complicated, but if your Mum goes bankrupt and your name is on the title deeds, provided that you have nothing to do with the business itself, it's unlikely that you could be on the hook (except as I have already mentioned above), but her bankruptcy supervisor (trustee in bankruptcy) will want to use her share of the property to make some money for her creditors and you could be forced to sell the property. If the bankruptcy supervisor suspects that your Mum has transferred the properties into your name to avoid losing them if she goes bankrupt, the bankruptcy supervisor might be able to unravel that on the basis that you haven't paid anything for your share.

I appreciate that this is a lot to take in! If you are considering getting involved in the business, it's really important that you take good legal advice beforehand, so you know what you're letting yourself in for. If you want to do that, let me know what area you're in and I might be able to recommend someone. I will say that it won't be cheap, but legal advice worth having isn't I'm afraid.

Sorry, meant to add that SkiHorseWonAWean is quite correct about putting the business in your name while knowing it's going under - it's called a transaction at an undervalue or a transaction defrauding creditors. What's more because you're her daughter, there is a presumption that she has done it for that reason and she would have to prove otherwise.

Bluntly, if she wants to give you some money, she needs to flog a property and give you the cash.
If she is bad at business she's going to get herself AND YOU caught up in a spiral of stupidity and further kneejerk, ill thought through, bad decisions. As you say, you haven't really got a clue about her financial affairs or how they tie into those of her H.

There is a minefield of inheritance tax, insolvency and other big bad areas which you are rightly very very wary of.

Don't sign a thing unless you have your own ( not mum's) lawyer go over it with a large magnifying glass.

With any luck you will still have a relationship at the end of it. Ans trust your gut, it sounds very sensible.

If the business is in a mess I can give you the name of the guy who started Ego in the North West and works as a consultant, he can basically do a Gordon Ramsay and turn it around for them, but of course he'll charge but it might stop them going bust.
email is yellowidol @ googlemail . com if you're interested.

Thank you all - some great advice there - I am going to talk it all over with DH tonight and decide what to do and how to tackle things.

On a more emotional level - anyone got any ideas on how to break the news to her that I don't want to enter into any of this? I have a feeling that she will use emotional blackmail ie "If you cared about me you would do this", as she has pulled a stunt like that before .

Sorry forgot to answer your question Generalissimo!

I don't think she owns a company that runs the properties.

They have apparently got one large loan that covers all the properties and includes the mortgage on their house.

I think they are in the process of selling the house to pay off some of the loan and to each take some capital to buy a place of their own.

Also mamatomany thank you very much for that, I will ask if she is interested - that is very good of you .

""If you cared about me you would do this""

-"if you cared about me you wouldn´t want me to put my name on a failing business"/"wouldn´t have invested all the inheritance with your husband"

You've lost the money from your grandmother, as I'm sure you realise. Anything you do now is throwing (your) good money after bad.

If there's a large, interest-only loan providing for the buildings, they have no value aside from the capital appreciation they may have experienced since the loan was taken out. You don't say when the businesses were started, but given the state of the commercial property market these days (good for Oxfam, not so good for anyone else) that's unlikely unless they were very lucky. "Borderline" businesses probably don't have goodwill of any value, in other words they aren't worth much sold as going concerns, and unless they're borderline because of all the gold sovereigns they have as stock for the coin collecting businesses, they probably aren't worth much as a gone concern, either.

When you say they money was "invested" in the businesses, it sounds like it was used as seedcorn money to get them started, and there is now no asset that could be sold to realise it. Had they bought a building, say, it would have a non-zero value, even if it represented a loss, or had they bought a business with significant goodwill, like a successful fish and chip shop, that would be saleable as a going concern. The money's gone, and only leaves an echo in the (probably zero) value of the businesses they now have.

Restaurants and cafes are the number one way to fail. Some of them are opened as hobbies by the bored spouses of professionals, underwritten as hobbies, and don't need to make a profit. Some of them are opened by incipient Marco Pierre Whites, and if they're incredibly lucky, they make it. The rest go bust.

Your parents have spent their inheritance. You won't get getting any of it. They have substantial debts that need servicing. This is hard advice, but unless you want to lose your house, walk away. Now. The properties are worth nothing beyond the loans on them, the businesses are worth nothing, there's no asset or income stream here. If you want to avoid going bankrupt yourself, walk away.

I completely agree with you tokyonambu.

It is very sad that the money has gone, but to me, as I never had it to begin with, it is not a loss to me, although I know my grandparents would be very disappointed.

Does anyone have any advice to give to my mother as an alternative to opening up a tearoom?

She has these properties, but seems to be unable to sell them at a price that will not leave her with negative equity.

The problem is that the only income she has is from the businesses. If she sells all the properties and businesses, and is left with nothing, then she will have no income.

I have said to her that she will need to go and work in Tesco's or something if it comes down to it.

Or does she just get declared bankrupt?

"Does anyone have any advice to give to my mother as an alternative to opening up a tearoom?"

Bankruptcy.

Damon Hill once said that the best way to make a small fortune in motorsport is to start with a large one. Running a tearoom seems equally ruinous unless you own the building outright (she doesn't) or have a brand which allows you to charge over the odds for cheap products (hello Starbucks).