£1 Business Sales: Lifeline or Trap?
Running a business under creditor pressure is one of the most stressful experiences an owner can face. HMRC petitions, supplier demands, loans backed by personal guarantees, staff who need paying - and in the background, the family home at risk. In those circumstances, many owners will grasp at any lifeline, no matter how thin.
That instinct is understandable. But rushing into the wrong kind of “rescue” can leave owners worse off, not better.
A cautionary tale
We recently held a meeting with a distressed SME where the owner, under severe pressure, sold their trading company for £1 to a turnaround buyer. The buyer promised a cash injection and help with personal guarantees. The deal was hurried through on the basis of trust, without binding protections.
On completion, the buyer took control of the business and moved existing cash into their own accounts. But the promised working capital didn’t arrive. Payroll was missed, staff were left in the dark, a critical shipment of stock remained impounded, and key supplier relationships collapsed.
The owner had given up control – but still carried the liabilities. It was the worst of both worlds.
Not an isolated case
This is not unique. We have seen other SME owners hand over their businesses for £1 in the hope of saving jobs and protecting their own position, only to find that nothing improved. In fact, it often accelerates the decline.
At the other end of the spectrum, the BHS sale by Sir Philip Green for £1 is a high-profile reminder that these “nominal value rescues” rarely deliver clean solutions. In that case, it wasn’t only the seller who came under scrutiny – the buyer too was left with liabilities, reputational damage, and ultimately parliamentary intervention.
The lesson is clear: £1 deals are not magic bullets.
Why these deals fail
The fundamental problem is structure. In moments of distress, sellers often agree to vague terms because they believe any deal is better than none. In our case above, the contract included only “best endeavours” to resolve personal guarantees. The cash injection was never documented as a requirement.
That left the buyer free to take control without delivering on their promises. Staff, suppliers, and HMRC were no better off. And the seller had no meaningful protection.
As Sandy Kinninmonth of FRP Advisory often reminds us, not everyone in this market is nice. There are genuine turnaround buyers – but there are also opportunists who exploit pressure and desperation.
What to do instead
The earlier you act, the more options you have. We often see directors delay conversations out of pride, fear of embarrassment, or the hope that “one more order” will solve the problem. By the time they seek advice, the walls are already closing in and choices are few.
Act early, and you may be able to:
- Restructure finance or negotiate with creditors.
- Arrange a pre-pack administration that secures continuity for staff and customers while protecting directors.
- Market the business to genuine buyers who can inject working capital and add value.
- Put proper legal structures in place so that if a sale does occur, liabilities are dealt with at the same time.
All of these outcomes are preferable to a last-minute, ill-structured £1 rescue.
The real message
If you are facing creditor pressure, don’t leave it until the last minute. Talk to professional advisers – legal, financial, and insolvency – while you still have options. The first call is the hardest, but it is also the most valuable.
At Branta, we work alongside restructuring specialists like FRP Advisory to ensure that business owners are protected and that transactions are structured properly. Our role is to find genuine solutions that give businesses a chance while safeguarding directors from the risks of rushed decisions.
A £1 sale may sound like a lifeline. In reality, it is often a trap.
