A group reorganisation generally involves the transfer of assets, which may be shares in another group company or the business of another group company, from one group company to another.
For some companies, multiple entities can result in excessive and avoidable costs, processes and compliance burdens, duplication of activities, and could even expose your business and directors to unnecessary risks.
It might be prudent to ask yourself why you have all of those entities listed as subsidiaries and what purpose a large group structure serves.
If you cannot answer this, a corporate simplification may be what your business needs to reduce costs, streamline its structure, and improve operations.
The benefits of simplifying your company structure
Reducing complexity by eliminating legal entities which do not provide economic benefits to the group could be advantageous to your business model for the following reasons:
- Costs associated with the upkeep and maintenance of a large and complicated structure consisting of various companies should be considerably reduced.
- You can unlock the potential for your business to transform by removing unnecessary barriers to growth.
- Accountability is improved because a more streamlined structure will enhance the visibility of risks faced by a business and enable these to be dealt with more efficiently.
- The process of liquidation is a proven tool for addressing legacy contingent liabilities and concluding them.
- A greater proportion of senior management’s time and resources can be spent focused on the key value creating activities of a business.
- Simplifying your group also makes it easier to implement new solutions and innovate with technology, which can further add value to your business.
Why should I streamline a group structure?
As touched on when discussing the benefits of simplifying a company’s structure, there are many reasons why it might be a good idea for certain businesses.
Some group structures can be too complex for their own good, and reducing this complexity seems the obvious answer. A needlessly complicated group structure can bring significant additional costs to a business, takes up a large proportion of management time, and can also have an impact on how the group is viewed by HMRC.
A complicated group structure means HMRC will likely identify the group as having a high-risk factor. This in turns leads to a higher likelihood an HMRC enquiry will be launched against them, potentially costing money, time and causing a great deal of stress.
Streamlining a group structure may also be an early step towards selling the group or part of it.
Simplifying the corporate structure will likely make it more attractive to buyers if you are looking to sell your business.
On the opposite side of corporate transaction services, if a group of companies is being acquired by another entity, the acquiring group may want to restructure ahead of the acquisition. This may be so the targeted group can more easily fit into the acquiring group’s structure.
Following an acquisition, it may be necessary for the acquiring group to move the purchased assets around its group to ensure they are in the most appropriate subsidiary.
For instance, this may involve the transfer, which can be known as a ‘hive-up or hive down’, of businesses to other group companies, or the target group or company being transferred to a holding company in the group if it was not the acquirer.
Another common, and arguably the most important, reason why a group of companies would want to streamline their structure is to save on costs.
The upkeep and maintenance of multiple companies all requiring separate accounts, tax work, and bookkeeping can become very expensive.
Streamlining a group structure so that it consists of just one, or at least significantly fewer, companies than before will certainly reduce costs in the short and long-term.
Administration time will also be significantly reduced if all efforts are focused on a smaller number of similar companies, rather than multiple entities with various needs and differences.
How we can help
With our advice and expert technical knowledge, simplifying your company structure can be less complex than anticipated.
We will work alongside you to devise a plan for simplification and prevent expensive errors through careful diligence.
- We will prepare to eliminate entities that no longer serve an economic purpose and ensure assets from those companies are transferred to the companies which are being retained within the group structure.
- Once a company or a group of companies have served their purpose, we ensure asset realisations are maximised, and capital is returned to the shareholders in the most tax efficient manner.
- We can act as liquidators where this is determined to be necessary.
- We can simplify the balance sheets of the companies that have been identified for liquidation/strike-off, usually involving capital reductions and the declaration of dividends.
No matter what your goals are, we will help you accomplish them. We have the expertise, professional partners, and experience to guide you through every stage of your group simplification plan and ensure your objectives are met.
Contact us today to discuss how we can advise on and assist with your company restructure.