Company restructure

Company restructure

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I would welcome input on the cleanest way to reduce a small group of holding co plus 2 subsidiaries, one pretty much dormant, the other trading, to just leave the trading company and get rid of the other two. All are showing retained profits so I don't anticipate any major problems. Would there be any pitfalls to
1. winding up the dormant co.
2. Doing a share exchange with the holding co so holding co shareholders become trading co shareholders and holding co is then struck off.

anon

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By gianpi
22nd Sep 2007 22:14

Hive up the trading co to the parent
You may consider hiving up the business of the trading company to the parent.
Perhaps a change of name to the parent (close to the name of the trading co.) would be useful to preserve the brand.
Then you might transfer assets and liabilities to the parent company thus leaving the trading co stripped out. on the parent co books you will have investments (the original value) and intercompany loan.After winding up the trading co you can offset the investment against the intercompany loan.
Obviously in reality it can be a little more complex as there is a procedure to follow but the major benefit is that by following the said above process the parent co will avoid any taxation.
Let me know if you want to pursue the above.
Gianpiero

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By patricia caputo
23rd Sep 2007 13:42

This exercise needs a little thought

I cannot see how you can have a share-for-share exchange with the holding company. This creates 'prohibited' reverse sharehodings. It is probably best to hive-up the existing trade to the holding company (using s171 TCGA 1992, s343 ICTA 1988, s100(1C) election for stock and so on). Then arrange for name-swap with existing trade company. It is probably best to extract reserves from subsidiaries first before liquidating - which will be tax-free in holding company. The transfer should be a TOCG for VAT.

Inter-company accounts will also need to be settled and cleaned up before liquidating/striking-off dormant subsidiaries.

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