A client wants to set up a number of companies, the proposed structure would result in the "top" company (company A) owning 49% of a another company (company B) and the other 51% being owned by a number of individuals, Company B would own 5% of the shares of company A as an unlisted fixed asset investment. Is there any problem with this proposed structure that anyone can tell me of? Thanks
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Unless there is a very good
Unless there is a very good reason for that complexity it should be avoided at all costs.
What is it intended to achieve?
I thought that it was illegal for a subsidiary to own shares in its holding company (since at least CA1985). They would be voided.
This is what CA2006 says:
http://www.legislation.gov.uk/ukpga/2006/46/part/8/chapter/4/crossheadin...
That may be right, although I haven't checked. But in any event, illegal or not, it must be easier and more transparent to issue shares to the shareholders in B as part of the consideration for the purchase of their 49%, to achieve the same result.
Agreed John. Keep it simple.
For a start, the OPs proposal would have inter-company dividends going round in ever decreasing circles.