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  • Reorganisations & Reconstruction

    Business owners might want to restructure their business for a variety of commercial reasons, such as affecting a takeover, succession planning or restructuring a group to maximise efficiency and savings. A reorganisation can have various tax implications and timely tax planning is therefore crucial.

    Setting up a corporate group

    Setting up a group structure can be used as a tax-efficient pre-sale structuring strategy, for asset protection purposes or as a means of expansion by acquiring new businesses and ventures.

    Splitting trades & businesses

    A reconstruction mechanism, called a ‘demerger’, can be used as a tax-efficient method of splitting and transferring businesses and trades into various entities.

    Succession planning

    Implementing a well-planned reorganisation and careful planning of corporate structures can be an effective and tax-efficient mechanism for succession planning and passing assets to future generations.

    More about reorganisations

    The terms “company reorganisation” or “company restructuring” involve situations where a company significantly modifies its ownership or operations to achieve certain commercial objectives.

    There are various routes which a company can take to reorganise its business, such as introducing a new holding company, splitting interests by way of a demerger or a sale of shares by the exiting shareholder to a member of the senior management team. All of these methods will have different tax consequences depending on the specific circumstances of each transaction.

    Given reorganisations can be complex and can have potentially significant tax implications for a company as well as its shareholders, all parties must have a comprehensive understanding of the commercial objectives of the restructuring.

    There are many ways in which a corporate reorganisation can be implemented. Some of these are summarised below.

    Share reorganisations

    A share reorganisation can include a wide range of transactions such as alterations of rights, a purchase of existing shares or capital reductions.

    Alterations of share rights may be undertaken for various commercial reasons, for example, the issue of reclassification of different share classes may be necessary to vary the existing voting rights of the shareholders.

    Corporate group structure

    In certain circumstances, it may be suitable to implement a new corporate group structure. This could be undertaken by incorporating a new company that can acquire the shares of an existing company, either by share-for-share exchange, cash or loan notes. There must be clear commercial reasons for structuring a reorganisation in this manner to ensure that the reorganisation can be undertaken tax neutrally. It is advisable to seek HMRC clearance before undertaking such a transaction.

    Demergers

    There are many reasons why a corporate demerger may be attractive. Splitting the businesses could be seen as a way to unlock shareholder value. A demerger could also be undertaken to ring-fence liabilities attached to a particular business, or as a preliminary step before the disposal of a business.

    There are various methods of implementing a demerger, including statutory as well as non-statutory routes. Demergers can be complex and it is crucial that appropriate tax advice is sought in order to implement such transactions tax efficiently.

    Want to know more?

    Visit the Knowledge Centre for insights and advice on a range of tax issues, including reorganisations & reconstructions.

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    Please provide as much detail as possible in regards to the reason for your enquiry so our tax advisers can prepare and tailor their response to reflect your needs. We will endeavour to - respond / call you back - to discuss your enquiry and you will not be charged for this time.

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