Stop notice 25

Arrangement details

A property business undertaken by an individual, individuals or in partnership (the ‘Users’) obtain an agreement from a third-party lender for bridging finance to be provided to the property business.; The Users, a limited company of which the Users are directors and the lender enter into a ‘facility agreement’. The amount provided to the business is to extract the capital from the business before the property business is incorporated into the company. The liability to the bridging loan is to be transferred to the company as part of the sale of the assets and liabilities of the company (whereas the existing mortgage liabilities on the properties are not). A fee is due for using the facility and repayment in full is required a short time after the amount is drawn down. The Users certify that the obligations under the loan facility will not breach any existing borrowing contractual agreements.; The bridging loan is drawn down by the individual.; A ‘Sale and Purchase Agreement’ is entered into to substantially sell the property business to a limited company in exchange for shares. The business (the property business run by the Users) includes all the assets and liabilities of the business. Schedule 1 of the agreement outlines the consideration in shares, schedule 2 outlines the properties and their values and schedule 3 outlines the mortgage liabilities and the bridging loan. The agreement specifies that a Trust Deed, Agency Agreement and Contract for Sale are also entered into which regulates the future relationship between the purchaser (the company) and the sellers (the Users) post transfer. The sale and purchase agreement purports to transfer all the assets and liabilities of the business (as outlined in schedule 2 and 3 of the agreement) to the company. However, the mortgage liabilities on the properties are not transferred or satisfied as part of the sale. Instead as a condition of the sale, the company adopts responsibility, in the form of an indemnity, for the servicing and repayment of any mortgages yet to be redeemed. This is achieved through the additional agreements entered into as part of the transfer.; The ‘Trust Deed’ is entered into by the Users as trustees and the company as beneficiary which allows the trustees to hold the legal interest in the properties upon trust for the beneficiary.; The Users (as the mortgage holders) and the company enter into an ‘Agency Agreement’ this appoints the Users as agents for the company for the purpose of making mortgage payments for the properties held in trust and the making and receiving of other payments and receipts in relation to the properties in the trust as required.; The Users as ‘sellers’ enter into a Contract for Sale with the company ‘the purchaser’ dated the same as the sale and purchase agreement, to sell ‘with full title guarantee’ the properties to the company. The completion date will be 28 days after written notice is given by the company to the ‘Sellers’ (or their ‘successors’) that it wishes to complete the sale of a specific property. This is the deferment of the legal title transfer until the end of the existing mortgage contracts or earlier.; The transfer of the business takes place, and the company now holds the beneficial interests in the properties and the indemnity to pay the mortgages and the bridging loan.; The Users, as directors, make a loan to the company of the amount equal to the bridging loan and the company repays the bridging loan it has now become liable for. The bridging loan is eliminated, and directors get a credit into their loan account for the amount loaned to the company from which they are expected to be able to draw tax free.