Selling 50% of a ‘private’ company

Ok. Obviously I will need some private advice, however I will put it to the brains trust here first.

Company A - is a pty Ltd registered for GST. It currently owns residential property worth approx $1mil with loans of $200k to the bank and $300k to each shareholder ($600k in total)
The company shares are owned
50% by company D (also a pty Ltd)
50% by the XYZ Trust.

XYZ Trust would like to sell its shareholding to Company D.

In doing so Company A would repay the shareholder loan ($300k) and company D would acquire the remaining 50% shareholding of Company A.

Questions
A) is this possible
B) what tax implications are there for each entity?
C) is stamp duty applicable?
D) what other considerations are there.

Thanks

Blacky

*edit* all WA based

 

Where does company A get the money to repay the shareholder loan?

 

1. Yes

2. CGT for the transferrer and Stamp duty for transferee

3. Could be, have to look closely at the landholder provisions of the duties act

4. Estate planning, asset protection, control, mortgage agreement, consideration, deductibility of interest, small business concessions, land tax, funding, structure of the company, etc etc

 

Could a share buyback be used in this option?

 

Consider the potential issue of directors guarantees for the exiting shareholder.

Also make sure the shareholder who sells confirms that they have no entitlement to termination payments in their capacity as a director.

The share transfer needs to be at market value or it will be deemed at market value.

It is likely (not certain) that stamp duty will not apply.

A share buyback from a shareholder is likely to get the sort of the same net cash outcome as a share sale by the shareholder - it is different. It might be better in some instances.

 

are these development assets ? do small business CGT concessions apply ?

look to modification of tests for sale or transfer of shares and potential application of CGT concessions to the transfer

 

No transfer duty - landholder kicks in when land is worth $2M or more in WA.

 

Any associated entity provisions?

 

Yes you can trace ownership through companies and unit trusts I believe.

 

That could mean that duty may apply if associated entities own land in WA. Best to seek specific legal advice.

 

Landrich provisions apply to shares as much as land itself