SPV Ltd Company, Mortgages and Shareholders.

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    SPV Ltd Company, Mortgages and Shareholders.

    Hi I have set up an SPV Ltd co for a property purchase. We are now attempting to get a mortgage.
    Currently the ltd co has 4 ordinary shares worth £1 each.
    The issue is that I would like to sell 2 of the shares to a friend/business partner to invest in 50% of the deposit. This parson is Canadian and the mort company do not like this. The brokers have said that the Ltd company can take out the mortgage with just me as the shareholder/liable person and then sell the shares to the Canadian after the deal is done.

    Hmmmm. I am a bit cautious/worried about this.

    1) Is the mort company Ok with me selling shares?
    2) Is there a tax implication - ie I want to sell half the shares for half of the deposit and just get my money back tax free, as really all I am doing is just kind of bridging the purchase?

    Is there a better way to go about this?

    Many thanks in advance.

    #2
    May I suggest that your broker establishes the attitude of the lender. Whether the sale of share is done before or post mortgage completion the friend will hold more than 20% of the company , a breakpoint which normally triggers a requirement of lenders for the shareholder to give Personal Guarantees; if he has a permanent right to reside and has a good credit profile that shouldn't be a problem if indeed he is prepared to give PG's but if he is domicile do in Canada or elsewhere then that could prove to be a fundamental stumbling block particularly if the sale occurs post Completion as it might prevent refinancing of the property. So please get your broker to do his job properly and establish the facts for the interests of his client.

    Comment


      #3
      Thanks so much for the reply, I think your suggestion this is the correct course, I guess I just needed a sounding board/sanity check. Cheers.

      Comment


        #4
        No problem , sometimes it is easy to forget that just because someone is a shareholder and not a director that this puts them out of court so far as a lender might require their Personal Guarantees. Some lenders kick off at 20% and others at 25% but it is always assumed that the Directors have the great share stake.

        Hope all goes well with your plans.

        Comment

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          I don't see that you retained a benefit, but I can't find any case law to that effect. But if rent was payable it would have gone in both directions (you would have paid your son half the rent and he would have paid...
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          5 years ago i gifted part of my property to my son as joint tenants. We lived in the property together. So its possibly a grob.

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          by Bill31
          Interesting that it may not be a grob as we own it all together. But surely hmrc will view it as i retained a benefit.

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          by AndrewDod
          Although they were BOTH living there and both owned it -- so the share gifted is probably not a GROB. It would be if only the OP was living there (owning only a portion) and not paying rent.

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          Ok thanks.
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