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Shares in a permit aircraft - right to buy back?

Say you're only likely to live in one place for a few years before moving. You would like to sell shares in your aircraft to help cover costs, but because it's on a permit they have to be equity shares...

Can you specify a clause to the effect that you have a right to buy back shares on demand, so that you don't get into a position where you have to sell the whole aircraft when you next move? Do you have to retain 51% of the shares in the aircraft, or anything like that?

Not contemplating doing this in the near term, but something I've occasionally wondered about.

Who would want to buy shares under those circumstances?

Forever learning
EGTB

Somebody who would be happier knowing that they had a ready buyer for their share, rather than having to continue to pay costs because they were unable to sell it when they themselves wished to relocate.

Egnm, United Kingdom

Interesting question whether such a buyback scheme would be allowed under the UK "5% min shareholding" rule for the (what used to be called) Private CofA regime.

It's a bit like a trust which can be cancelled by the beneficial owner (the Trustor, in US-speak). These have been set up and the beneficial owner got a pre-signed Bill of Sale which he could activate at any time. The FAA has ruled these trusts are not valid.

The problem with any scheme in which the other pilots are less than committed is that they have much less incentive to not trash the aircraft, and this is a real problem in GA. If you do a zero equity group (the standard approach to this situation) you tend to get this.

Administrator
Shoreham EGKA, United Kingdom

If you're setting up the syndicate, you can decide the rules. It's then up to the buyer if they like them or not.

I did something similar with a permit group, such that they could only sell the share back to me, but they could also do that at any time and would get their original capital back.

I know somebody who got bitten recently as he couldn't buy back the share in the aircraft that he had built when he had to relocate for work reasons. The partner concerned refused to cooperate.

The main advantage of a syndicate is sharing the fixed annual costs. Depreciation of capital costs is relatively a much smaller consideration unless the aircraft is almost new and factory built.

If you reduce the risk factor for a potential partner it can make the deal quite attractive for them and compensate for the freedom to sell their share on an open market.

KHWD- Hayward California; EGTN Enstone Oxfordshire, United States

What is not often understood is that the share is in the partnership (or the limited company if applicable) and the aircraft becomes an asset of the partnership (or Ltd Co.). Permit or CoA makes no difference AFAIK.

The partnership agreement (verbal or written) can say anything that a prospective will accept. Guaranteed buy-back is attractive to some. It's not unusual in commerce and companies sometimes buy back their own shares. But on-demand by the original owner to the exclusion of other options, maybe not so. Might depend on the interim contributions. If it was me, I'd want the quid-pro-quo.

One snag is that the original owner needs to have the cash on tap to do the buy-back. To avoid temptation, that may mean banking it at a pathetic interest rate. Can't have cake and eat it too.

Somebody who would be happier knowing that they had a ready buyer for their share, rather than having to continue to pay costs because they were unable to sell it when they themselves wished to relocate.>

Is that the offer? I read it the OP will be able to buy back at any time he wishes - but the share buyers cannot make him do so at a time of their choice. I'd be very wary of a two member group - four would be OK. I'd also be wary of an unequal equity group. (Member of a six group for over 23 years)

Maoraigh
EGPE, United Kingdom

Is that the offer? I read it the OP will be able to buy back at any time he wishes

Purely from a personal viewpoint, I would rather be in a position where I am forced to sell to a ready buyer, than find myself desperate to sell with no buyer in sight and ongoing overheads to meet'

At least with the former, I walk away with money, no ongoing costs, and ready cash to buy another share elsewhere.

Egnm, United Kingdom

The offer could be whatever would be acceptable to both the main owner and the share buyer. I see no reason why you wouldn't offer to buy back at the instigation of either the main owner or share owner.

At present I'm approaching things more from the other direction. My job means I'm likely to move 2-3 times over the next decade, before settling down. I would have bought an equity share in an aircraft had it still been on offer by the time I got my act sorted, but would not have considered it without a buy-back guarantee. As I recall the offer was a share for £1500, but buy-back for only £1000.

I guess the concern is that if the share-owner isn't seen to have equal rights and responsibilities then it could be argued that you were effectively renting rather than co-owning. Perhaps. For example, if I offered day-long shares for £1 in a permit aircraft with rental costs of £50 an hour, this in my view would be a clear breach of the spirit of the rules and not something I'd contemplate. But where would you draw the line?

The rules require that you have a minimum 5% share to be exempt from public transport requirements and that you pay a proportionate amount of the fixed and variable costs. I take that to mean that if the group dissolves, then you have a claim to 5% of the groups nett assets and liabilities. So long as you are paying at least 5% of the fixed costs and an appropriate amount for usage, then you are not flouting the rules.

KHWD- Hayward California; EGTN Enstone Oxfordshire, United States
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