Guidance on taking over a new company

Often it’s easier and more convenient to take over an existing company rather than opening a new company. Reasons for this vary and the major ones are:

• The company has a history – This should always be positive.
• There is a bank account in existence. As opening a bank account can take up to 5 weeks and requires a number of bureaucratic steps this is a major advantage.
• There may be an overdraft facility which is unused. This is a distinct advantage although the bank may reassess on a sale of the company
• The company is registered with HMRC as a taxpayer. Again bureaucratic and time consuming steps are eliminated
• The company is registered for PAYE and VAT with HMRC. Again time and effort is saved.
• There are supplier terms in place. Suppliers may reassess on a taking over of the company.

There may be more reasons more unique to individual circumstances and these should be reviewed to ensure maximum benefit is gained.

Taking over a company has however some risks if the company traded at any time previously. Broadly but not exclusively they are:

• Poor credit history, possibly with CCJ’s
• Legal claims, potential or actual,  against the firm
• Undisclosed/potential debts against the firm especially HMRC
• Non-compliance with HR legislation, the Company Act and the various Tax Acts all giving a potential liability against the firm and/or directors
• Disgruntled employees may create difficulties with the takeover.

If taking over a company where the history is not known and/or trading has or is taklng place a due diligence exercise is a must. These may not uncover all potential issues but will eliminate the obvious ones and reduce the risk. Where trading is taking place it’s best to get professional help with the due diligence.

Where a company is taken over from family many of these issues will become moot but some examination is still recommended.

For more information or help contact Richard Terhorst at 08450095360 or E-Mail Richard@rhtbusiness.com