For large corporates or owner managed businesses, corporate rationalisation can enable organisations to reduce inefficiencies, manage risk and return surplus assets to shareholders, either via a Members Voluntary Liquidation, orderly wind downs followed by strike off or partnership dissolution.
Recognising potential risks
Size of organisation aside, planning for an orderly winding up is vitally important. Undertaking relevant due diligence to identify the risk of claims arising is key to a successful wind down. We understand that identifying hidden liabilities can be difficult, particularly for groups or companies with a history of acquisitions.
Dormant entities incur ongoing maintenance costs to the business, including audits, annual returns and iXBRL compliant tax returns, which must be filed every year, even if no trading occurs. It is estimated to cost between £1,500 and £8,000 per entity per year to keep these dormant companies, even within a simple group. These costs particularly affect larger PLCs, with their greater corporate governance burden.
Simplification allows companies to justify or simplify a complex group structure and proactively manage their risk. This enables organisations to identify reasons to preserve entities or take action to safely streamline an organisation.
Owner managed businesses
When a company comes to the end of its life or is entering a new phase, the shareholders may either wish to change the structure or wind down operations.
Working with our tax and accounts colleagues, we consider the best way to achieve the shareholders objectives and implement the plan in the most efficient manner. Again, pre planning is paramount and steps should be taken early particularly if considering a change of structure.
The key advantages for an owner of a business are:
- any distributions are treated as a capital distribution;
- all liabilities have been considered and dealt with correctly; and
- HMRC satisfaction.
Benefits of corporate simplification
Through assisting in a project management role we have helped many clients to eliminate their unwanted dormant companies in a cost-effective and tax-efficient manner, saving internal costs and time of your in house legal and accounts staff.
For multinational groups, we work with our international partners to provide a seamless service. We have a proven track record in project management and implementation of complex group simplification offering a full conception to completion service.
Our national corporate simplification team has extensive experience in many sectors and multiple jurisdictions. We work to find the best solution for our clients, empowering them to move forward with confidence.
If you would like to discuss any of the above, please contact Karen Spears.