If you operate more than one company, then it may be worth making changes to have them held under a group or "umbrella" structure.
As always, however, there are pros and cons to this.
The main downside is the initial restructuring cost alongside the increased administrative and accounting burden of having to account and file for more companies, potentially on a group basis.
Great care should therefore be taken to determine that such a course of action allies and compliments a business's long term objectives against its business plan and projections.
If the exercise is approached and implemented effectively in an appropriate case, the downsides can be far outweighed by the benefits
These could include:-
● an excellent liability shield for group assets
● possible lower debt financing costs
● fostering greater innovation across the group
● tax free inter group transfers and structured sharing of losses against profits
● potential of tax free treatment on sale by GroupCo subject to relevant conditions being met (including the Groupco structure having been in place for required time periods)
● thus the potential for far more favourable end shareholder tax treatment and tax treatments more generally.
The guiding rationale behind a restructure and related scope of works could be fourfold, to achieve:-
● optimum ongoing tax treatment for the companies & their shareholders
● increased traction, value and ease of any subsequent sales process entered into, whenever that may transpire to be
● enable shareholders to have rights clearly defined and step back from day to day operations pre sale as desired with confidence
● facilitate other companies being brought into the group with simplicity as those opportunities arise from time to time.
One of our team supported the Board of a family business over a few years back which off the back of such a group restructure journey of its own (and by capitalising on a "Group" rebrand), won the fastest overall growing business in the region award 4 years later.
Such a restructure may involve specifically and by way of illustration:-
● a review of the articles of subsidiary companies to ensure they permit of the proposed restructure or the preparation and filing of amended articles as required in advance of the restructure
● preparation of shareholders agreements at subsidiary level to permit e.g. drag along / tag along & delineate responsibilities, and which importantly dovetail with the articles, to ensure relevant decision making against objectives stated - all additionally first class internal corporate governance measures in advance of any prospective growth or sale scenario that may, in turn, save sale cost when the time comes
● obtaining any risk minimising, non statutory advance clearances or written confirmations desired from HMRC for group structure with supporting rationale as appropriate / necessary and tax treatment on sale
● obtaining any consents to the restructure required from e.g. fund lines etc and renegotiations as needed
● creation of GroupCo with bespoke articles in place at point of set up that best facilitate stated objectives but leave all options open
● possible establishment of a Group Strategy Board separate and distinct from the Operational Boards of the subsidiary boards
● contracts between Holdings and subsidiaries, including e.g. asset transfers, IP licences, management fee agreements etc etc to ensure best tax management and asset leverage for the Group
● advance internal due diligence in anticipation of growth or sale, according to preference.
This could make for a far less time consuming and more cost efficient, flexible divestment process in due course.
As this is complicated process, specialist advice should always be sought.
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