Legal Advice
Can a periodic business tenant in occupation of premises obtain SHARE BUYBACKS a- lease from their landlord? how to buy out a You are a commercial tenant running a business from premises and you now want your landlord to grant you a written lease for a fixed term.
Shareholder
Alan Zeffertt Consultant
the company • be reducing the will be When director/shareholder in alease, SME perhapsAinshare a new lease, the tenant orderbuyback to grow is whereresolve You maya have been paying rent the dispute which could besubstantially wants it for is preferable forortheir sell your business, youthe willshares not monthlyto or leave, quarterly some purchases at an agreed price. unsatisfactory to both parties and able to a new and lease on shareholding byobtain over 25%; be on theto landlord years, but landlord has company still the uncertaintly of a court case terms to be agreed or if not shares toyour be sold to the orable to serve In order do this, company law rules must • hold under 30% of the issued share notice underbe section 26 of the not given you a fixed term lease. whoa will could be avoided by agreeing agreed as determined by the the remaining shareholder/s followed otherwise the directors can be capital. court. Accordingly the landlord 1954 Act requesting a new lease. What can you do to force the upon lease terms. continue to run the business. found liable for breach of their duties and The right to do this only applies landlord’s hand? cannot simply impose any terms Onetax way in which the landlord HMRC can deny concessions condition is and thatthe thecourt buyback must to tenants whose tenancy was favourable it wishes will look can regularise the position isAnother to The shareholders will usually ask the Rights under a periodic granted for a fixed term certain for the shareholder. be for the benefit of the company’s trade at the implied terms of the periodic serve a written notice under company’s tenancy accountant to advise on the exceeding one year or for any tenancy when what section 25 of the 1954 Act (or to pay inheritance taxconsidering from a death). value of the a price has term and thereafter Funding foryear the transaction must come from from It is likely thatshares. you areOnce a periodic terminating the tenancy andIn order to terms should be these inserted in the check whether conditions been thehave question theyear. tenantagreed, and if you been isinwhether to the company which muststating have sufficient whether or not the landlord new lease. occupationwill of business willand be satisfied, it is usually advisable to company buy backpremises the shares, or So thewhat should the tenant do? distributable reserves to is fund the to share willing grant a new lease The landlord is therefore likely to paying rent for more than remaining shareholder/s? apply for advance clearance that so on what terms including rent to HMRC buyback. If the funds areif not paid from Negotiate with your be agreeable to grant a lease to 12 months, you will have become and length of lease. the buyback will qualify for capital gains distributable reserves, liabilities can arise. a periodic tenant especially since landlord a protected business with Selling shares to thetenant remaining If the landlord opposes the tax grant treatment. Funds tenant can come from retained profits or it cannot increase the rent without the rights granted by the Landlord A periodic protected should shareholder/s is simpler than a company of a new lease, then it may only first terminating the lease under & Tenant Act 1954 Part 11. positionortoborrowings. negotiate share buyback, but there may be tax be in a strongcapital
Companythelaw As such the landlord cannot Act, procedures and the position will a new lease with the landlord who benefits in structuring the deal in the statute, most commonly issuesthe simply terminate your lease by as a would be keenTax remain uncertain. to regularise refusal on the grounds of The main company law requirements to be company giving youbuyback. one month’s notice. position. Without a lease, the Taking legal persistent rent ablewith for If a shareholder sells their shares to thearrears, being dealt a buyback ofadvice shares include: landlord cannot unilaterally It would need to serve you with Share sale or share buyback? to demonstrate It is best to seek legal advice first company, then the the shareholder may be an intention to increase the rent, or regulate a statutory notice under the 1954 • A contract for the share terms buyback thethe premises for its own before finalising in principle charged profit on use of the premises or income prevent tax. Theoccupy Act giving yousale, not less 6 nor With a share the than selling shareholder use or an intention to redevelop. between the Seller and the with your landlord toCompany. ensure that the tenant from sharing more than 12 notice and sale is treated like a dividend. However, in will simply sellmonths’ to the purchasing the terms of the new are not The landlord must demonstrate occupation or certain assigning its you will then have the right to • Board minutes to approve thelease share the shareholder may shareholder for the price. Thistenancy. could It is unlikely circumstances, the ability to do these things if onerous and reflect the terms of that the apply to the court foragreed a new lease buybackyour and existing paymentoral fortenancy. the shares. charged tax. be lumptosum payable completioinlandlord or by producing plans and Where couldbe easily sell itscapital gains necessary on a terms be agreed oron decided specifications and the necessary in the property while structured a payment over a periodinterest of there is a dispute with the landlord upon by theascourt. • Directors statement where payment The requirements for HMRC to treat the planning permissions. This can a protected periodic tenant thecapital. landlord is taking steps to time, or could be linked is made and out of Can you require the to future profits share buyback are that the for a landlord to it difficult contiuues in occupation for anas capitalmake terminate the tenancy without of the company, as an earn out. Funding landlord to grant a new seller must: regain possession. indefinite period. • A resolution of the shareholders. offering acceptable new lease will come from the purchaser and if the lease? terms, form it willtransferring be importantthe to seek If the tenant5 is a protected • Stock transfer With oral tenancy agreements if • have owned the shares for over years; purchaser is an existing shareholder, their legal advice as to your rights and business tenant and the landlord If the time has come that you a dispute arises the court would individual shareholding will increase. • be selling all their shareholding; or grounds to oppose shares. how to protect your position. does not have need the certainty of a fixed term need to hear evidence and try to refuse on certain grounds set out
expertlegal commercial solicitors will be pleased to advise. Please contact Alan Zeffertt IfOur youteam needofexpert advice, please contact Alan Zeffertt by email on aze@anthonygold.co.uk if you would like assistance: E: alan.zeffertt@anthonygold.co.uk T: 020 7940 3950 or ask for him or a member of our Commercial Property Team, telephone 020 7940 4000.
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