One partner buying the equipment off the other

[derekpayne]

A friend of mine has a business and is in partnership with with his wife, he has decided to sell his share of the equipment to his wife in order that if the worst comes to the worst the equipment would not be seized as payment for a debt which he has in his own name and not the partnership's, how does the law stand on this.

 

The partnership is forming a limited company but he will still owe the debt in his own name up to the point of the incorporation.

 

Cheers

[steampowered]

Have a look at http://www.legislation.gov.uk/ukpga/1986/45/section/339. This basically means that, if the friend sells his share at an undervalue or as a gift, and the partner is then made bankrupt, the bankruptcy trustee can ask the court to reverse the sale. The time limit for doing this is that the transaction must have taken place 5 years before the bankruptcy.

 

Obviously this is a much more difficult process than a bailiff simply turning up and taking the goods, so it would probably be wise to put all the equipment in the wife's name and create some documentary evidence of that.

 

Forming a company will not protect him. His debt will not transfer to the company unless the creditor consents to this. Realistically a personal guarantee will be required before lenders will lend to the company.