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Chris Dobson


As new technologies continue to emerge and develop rapidly, many entrepreneurial businesses operating in the same or neighbouring sectors will often expand their foothold in the market by way of acquiring their competitors or up and coming start-ups making noises in their respective field. This can be an excellent way of instantly addressing previous gaps in service offerings, opening up new business territories, obtaining ownership rights over new and exciting advances in technology, gaining key talent in the workforce and ultimately, growing revenue. 

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However, whilst focussing on the process of obtaining such new targets and the development of business plans and models to utilise the new assets acquired, it’s really important that companies undertaking such a growth strategy don’t lose sight of the need to manage their expanding corporate group structures to ensure that the new companies or businesses acquired are positioned effectively within the overall organisation.

At a very basic level, if a new company has been acquired, the new owners will inherit on-going annual obligations in respect of tax, accounting and corporate filings which obviously all carry increased professional costs and an increased (and potentially also more complex) internal administrative burden in managing the same. 

Conversely, from a legal perspective there is obviously a benefit in ring fencing separate businesses within individual companies in the interests of clear segmentation and also so that any potential related-liabilities can be limited and prevented from impacting on the rest of the group. However, post-acquisition, it may well be the case that a number of different companies across the group are now carrying out parts of the same business and so it will make sense to rationalise the group structure and combine the activities of several companies into just one. 

We are continuing to see a recent trend in overseas investment coming into the UK and for many overseas parent companies already operating across the world, an on-going key driver for them will be to simplify the structure of their respective business groups on a country-by-country basis in order to streamline internal administration work and also to pave the way for potential future disposals of separate areas of their business.

We are regularly instructed to assist in the process of implementing internal group re-organisations to address the points raised above and this will typically involve transferring the business and assets of one of more subsidiary companies into another company within the same group. Accountants and tax specialists will need to be involved in the process from the very start to ensure that the assets are transferred at an appropriate value (generally book or market value depending on the available distributable reserves position at the relevant seller company) and to check that the proposed transfer of assets doesn’t have any unintended tax consequences upstream within the group and that the transfer will be tax neutral. 

Early legal diligence is also necessary to determine (amongst other things) whether any third parties will be required to consent to the transfer, whether customers or suppliers, landlords of leasehold property or lenders with security in place over the relevant assets being moved internally. A classic exercise in this area for tech companies will be to review the terms of their licence agreements covering material software in use by the relevant business, as these will very often contain restrictions on the ability for contractual rights to be assigned to other parties. Essentially, it is of paramount importance to identity whether any parties outside of the wider organisation will need to be involved in the process in any way as early as possible to minimise the chances of any delays as a consequence of waiting for their assistance and ultimate sign off.  

Ahead of closing, a key legal characteristic of an intra-group reorganisation is the requirement to undertake a proportionate TUPE consultation with any affected staff. The exact nature and scale of such an exercise will vary on the numbers of staff involved and the extent to which their on-going employment will be impacted by the transfer, whether through perhaps a change in office location or otherwise. Either way, consideration will need to be given to ensure that any potential employee-related pitfalls are addressed and mitigated.   

The process of concluding a reorganisation will often be a cashless exercise whereby as consideration for acquiring the relevant business and assets, the purchasing group entity will assume all liabilities of the group seller and to the extent that the value of the relevant business and assets is higher than the value of such liabilities, the balance will be left outstanding as an intra-group loan. At the appropriate time after completion of the transfer, all necessary steps will be taken to close down any remaining business items of the now dormant seller (in particular, liaising with HMRC to ensure that all tax affairs have been settled) before an application will ultimately be made to strike off the company from the registrar of companies. 

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.


Get in touch

If you have any questions relating to this article or advice in relation to intra group reorganisations, please contact Chris Dobson on [email protected]

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