RichR
Premium Member
Registered: 17th Oct 01
Location: Waterhouses, Staffordshire
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If a company is forced into Administration by its banks/financial backers after discrepancies in accounting, especially due to valuation irregularities, i.e. business valued at £450million by the business (properties and future business) which is counteracted by a lower valuation of the business by the banks at say £200million giving a debt levy of £200million. What happens if the properties of the business (valued at £200m) are sold via the administrators for more (£400million + )??
Obviously, the valuation has been cocked up by one or the other party but when sold, they equal the figure given by the owners not the administrators which means the accounting was correct all along and technically the business was viable. Do the owners have a leg to stand on?
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AndyKent
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Registered: 3rd Sep 05
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Surely a discrepancy that big would be near-on impossible to get wrong? I mean property has a well defined valuation method and to value something at 50% of market value would be ridiculous.
If it happened though yeah, I suspect action could be brought under professional (in)competence.
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Neo
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Registered: 20th Feb 07
Location: Essex
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Surely this would be taken into consideration when the administrators are brought in.
I'm struggling to find a way to put this so it might not make sense -
If the company is a manufacturing company, of which 200m is held in future business and property, but they have to sell the factory in which the manufacturing takes place to generate the money, then the value of the future business is then null as they don't have a premisis to complete the future orders ?
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RichR
Premium Member
Registered: 17th Oct 01
Location: Waterhouses, Staffordshire
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This is a real case and I have a past connection to the business, hence being intrigued- the valuation of the business properties (according to the administrators/media) was wildly inaccurate at £450million in the accounting, the properties were valued and subsequently put up for sale at £200million; The vendors have have 200bids to consider and have announced that the offers made greatly exceed the estimated prices thereof, some reports are stating double+ the estimates
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AndyKent
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Registered: 3rd Sep 05
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For a business as big as that it's a tricky one I guess. If the company is loosing money hand over fist then it might be best to wind it up regardless of value.
If the bids are usual (ie. Not expected on the open market but due to bumping by a couple of interested parties) then it's not incompetent to have valued them lower.
Without knowing all the facts you can't say whether it was right or wrong.
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RichR
Premium Member
Registered: 17th Oct 01
Location: Waterhouses, Staffordshire
User status: Offline
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Business appears to have been profitable but only just; the valuation of the properties seems to be where the figure of £250m of debt has come from. I just wasn;t sure how it worked
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