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Birmingham Assets and Payments

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On 12/6/2021 at 5:57 PM, noaksey said:

Any word from the Birmingham promotion on this yet?

News on website reads that a new company has been formed who has acquired the assets of the previous promoting company. This more than likely means the old company will be wound up and unless there are adequate funds left over, unsecured creditors (which riders are) will not receive the money owed to them. 
That said, the BSPA could arrange for the riders to be paid out of the security fund lodged with them by the previous promotion - assuming there is anything left over. 

Edited by 1 valve
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On 12/8/2021 at 9:50 AM, 1 valve said:

That said, the BSPA could arrange for the riders to be paid out of the security fund lodged with them by the previous promotion - assuming there is anything left over. 

i hope promotions have learnt a lesson not to pay guarantees but pay for points earnt. this is one of the problems i see in the sport when it comes to finances

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26 minutes ago, stevehone said:

i hope promotions have learnt a lesson not to pay guarantees but pay for points earnt. this is one of the problems i see in the sport when it comes to finances

Maybe, but whether solely pay per point or involve guarantees it seems that when outgoings become higher than income then the riders are the ones who are not paid what’s owing to them by folk not running their business properly. 

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On 12/8/2021 at 9:50 AM, 1 valve said:

News on website reads that a new company has been formed who has acquired the assets of the previous promoting company. This more than likely means the old company will be wound up and unless there are adequate funds left over, unsecured creditors (which riders are) will not receive the money owed to them. 
That said, the BSPA could arrange for the riders to be paid out of the security fund lodged with them by the previous promotion - assuming there is anything left over. 

This is where i dont understand business laws at all. If you are acquiring all of the company assets, surely you should be taking on all the company liabilities as well.

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5 hours ago, teaboy279 said:

This is where i dont understand business laws at all. If you are acquiring all of the company assets, surely you should be taking on all the company liabilities as well.

You would only take on the previous companies liabilities if you was buying the company itself with the intention of continuing that company.

In this case, a new company has bought a companies assets and will trade as a brand new company.

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The Masons have now said that all riders have been paid.

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10 hours ago, teaboy279 said:

This is where i dont understand business laws at all. If you are acquiring all of the company assets, surely you should be taking on all the company liabilities as well.

Business are usually bought in one of 2 ways:

1. An asset sale - the buyer only purchases the assets of the company (e.g. air fence, tractors, rider assets). They would then operate as a completely new company. This is a much less tax efficient way of selling a business.

2. A share sale - the buyer is purchasing the shares of the company, meaning that they take everything, including all assets and liabilities. They continue to run as the same company, so much more risk is taken on meaning that a thorough due diligence process should be undertaken. Without this, there is a much higher risk to the buyer, but it is much more tax efficient to the seller as they are often entitled to an entrepreneurs relief (meaning they only pay 10% tax on the sale, which can result in huge savings).

Given Birmingham's struggles this year, I would be very surprised if a savvy business person were to buy the club using the route of an share sale. So, assuming the consortium bought the assets and not the shares in the company, the debt is not theirs and remains with the previous promotion (and so it should, as it is their debt!).

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1 hour ago, AndyPresley said:

Business are usually bought in one of 2 ways:

1. An asset sale - the buyer only purchases the assets of the company (e.g. air fence, tractors, rider assets). They would then operate as a completely new company. This is a much less tax efficient way of selling a business.

2. A share sale - the buyer is purchasing the shares of the company, meaning that they take everything, including all assets and liabilities. They continue to run as the same company, so much more risk is taken on meaning that a thorough due diligence process should be undertaken. Without this, there is a much higher risk to the buyer, but it is much more tax efficient to the seller as they are often entitled to an entrepreneurs relief (meaning they only pay 10% tax on the sale, which can result in huge savings).

Given Birmingham's struggles this year, I would be very surprised if a savvy business person were to buy the club using the route of an share sale. So, assuming the consortium bought the assets and not the shares in the company, the debt is not theirs and remains with the previous promotion (and so it should, as it is their debt!).

But if the promotion is a limited company and goes into liquidation, the directors can probably walk away. :unsure:

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2 hours ago, Ray Stadia said:

But if the promotion is a limited company and goes into liquidation, the directors can probably walk away. :unsure:

Yes they can walk away. However, in the case of the previous Birmingham promotion, by selling the assets of the company to the new promotion, the old company generated some funds which together with the "bond" was most probably sufficient to pay off creditors which would have included the riders. Only after the creditors have been settled would the shareholders have been able to receive anything albeit, any money they had lent the company would also have been included in the creditor settlement on an equal basis. 
 

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