A restructure of a group of companies may be carried out for a variety of reasons, including protecting key assets, securing tax and accounting advantages, improving access to finance, preparing for a business or company sale or acquisition, or rationalising the group and removing any dormant entities.
Moving key assets, such as property and intellectual property, from a trading company into a separate holding company will protect them from the risks of the trading subsidiary. Alternatively, bringing together a disparate portfolio of companies which are commonly owned can significantly improve covenant strength when grouped and therefore access to finance.
It is important that a restructure is properly documented in order to demonstrate clearly the steps involved in the event that, for example, HMRC investigates or you look to sell the group or part of it.
At the outset of a reorganisation, the following should be considered:
Will the transfer of a business be done by way of a share acquisition or an acquisition of the assets?
In a share purchase, all the company’s assets, liabilities and obligations are acquired. If the acquisition is of the business, only the assets and liabilities which the buyer agrees to acquire are transferred.
Various approvals could be required for the reorganisation.
If the group has any banking facilities, formal consent from the bank may be required before completing the restructure. If a business being transferred requires regulatory approval, such authorisation will need to be obtained before completion of the restructure and the relevant authority should be notified as early as possible. In an asset transfer, contracts will need to be checked for any restrictions on assignment and whether the consent of the other party will need to be obtained and customers will need to be notified that the contract has been moved.
If there are employees in a business being transferred, the Transfer of Undertakings (Protection of Employment) regulations (TUPE) may apply.
Specialist employment advice should be taken in respect of consulting with employees about the changes which may affect them.
Tax advice could be key to the success of the restructure.
Securing tax advantages is often a key reason for implementing a restructure, therefore tax advice should be sought from an accountant or tax advisor at the outset.
If you are considering a group restructure, please do get in touch with a member of our Corporate team to discuss how we can help you implement it.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.