Corporate re-organisation on the radar?

The corporate team at Wake Smith has been involved in a multitude of internal re-organisations for clients, across a wide range of sectors.

Amelia Vaughan, solicitor in the company commercial team at Wake Smith, looks at the process.

This article covers:

• Re-organising to exit
• Re-organising through demerger
• Re-organising for an acquisition
• Re-organisations often involve setting up a new company for a particular purpose
• Need help with a re-organisation?
• Your next move?

There are a number of reasons why a re-organisation may be considered by a company.

It is always imperative to also take advice from your accountant in order to achieve the correct structure and where appropriate obtain any necessary tax clearances from HMRC when considering any of the below.

Re-organising to exit
You may want to re-organise the structure of your business in preparation for exiting the business.

For example, to prepare for an exit, there may be a transfer of property and equipment owned by the company to a separate company which the exiting shareholder(s) will own and then rent the property and equipment to the trading company, allowing the exiting owners of the trading company to receive an income after the sale of the trading company.

Re-organising through demerger
A demerger is another way of re-organising: a demerger enables the owners to split the business for a change of business strategy (such as splitting the business into separate companies) or to allow the owners to go their separate ways.

Re-organising for an acquisition
Prior to purchasing a new target company or the business and assets of a target company, you may wish to re-organise your current business to prepare for the new company or its business to fit into your businesses group structure.

Additionally, once you have acquired a new company or its business, there may be the need for re-organising. For example, the acquisition of the new company or its business may have been made with the intention that following the acquisition, there would be an internal transfer of the new business or assets to a subsidiary company (a hive down).

Re-organisations often involve setting up a new company for a particular purpose
This could be the incorporation of a new holding company, using a share for share exchange mechanism or, if a group structure already exists, a separate subsidiary to undertake part of the business (hive across/transfer of a division) or it is required to facilitate the demerger process.

Need help with a re-organisation?
As well as expertise from Wake Smith, re-organisations generally require the input of a number of the client’s professional advisors including its accountants and, sometimes, its surveyors, to enable the required objective to be reached. In addition, it should be carefully considered whether the consent of third parties outside of the ownership structure are required.

As the individuals involved are usually directors of various companies, it is advisable to get independent valuations for any assets that are to be transferred between various companies as part of the re-organisation.

This will ensure that the individual is acting in the best interests each of the various companies/businesses.

Your next move?
If you would like to discuss re-organisation further, please contact our Company Commercial team on 0114 266 6660.

Published 09/12/2022