Q&As

In many asset sales the apportionment of the business' sale price apportions £1.00 to the business' lease, why is this and how is this apportionment of the overall consideration not deemed a transaction at an undervalue?

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Published on LexisPSL on 03/01/2017

The following Restructuring & Insolvency Q&A provides comprehensive and up to date legal information covering:

  • In many asset sales the apportionment of the business' sale price apportions £1.00 to the business' lease, why is this and how is this apportionment of the overall consideration not deemed a transaction at an undervalue?
  • Transactions at undervalue (TUV)
  • Tax considerations

In many asset sales the apportionment of the business' sale price apportions £1.00 to the business' lease, why is this and how is this apportionment of the overall consideration not deemed a transaction at an undervalue?

STOP PRESS: From 6 April 2017, the Insolvency Rules 1986, SI 1986/1925 were revoked and replaced by the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024. The content in this Q&A may have been affected by this change.

Transactions at undervalue (TUV)

The reason that a nominal amount is often attributed to business leases on a business sale is that this reflects their market value. A commercial rent is usually payable on such leases and so there is no intrinsic value in the lease. This contrasts with the position of a long leasehold interest where there may be some value in the asset.

The sale of an asset at an undervalue will only be an issue from the perspective of a transactions at undervalue (TUV) claim if the selling company was insolvent at the time of the transaction, and the company subsequently enters into administration or goes into liquidation within the relevant period. Under section 240 of the

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