Hi..,
I recently joined a small manufacturing firm. They have two companies (Company A and B) with the same directors (2 directors).
Company A was established about 10 years ago. What has happened was, the 2 directors have formed Company B to acquire Company A when they heard that the Company A is going to be sold by its former owners. So they have equally pumped in the money they want to buy company A into company B as share capital and then have bought 100% shares of company A through company B. This transaction has happened in the middle of the accounting year (01/09/2017). They haven't wind up company B, instead, it also continues as an active business entity.
Since the date Company B (new company) bought Company A (old company), they have started to issue invoices from company B and asked the customers to pay into Company B's bank account. Similarly, all the payments have been done by Company B's bank account since the acquisition date. However, they haven't transferred the assets and liabilities from company A to company B. So up until 31/08/2017 all the revenue, expenses, assets and liabilities were recorded in company A, but since 01/09/2017 expenses and revenues have been recorded in company B, but assets still belong to company A.
The directors want to continue with company A (old company) as it owns another foreign subsidiary.
I think the best option is to transfer the assets of Company A to company B at book value as at 01/09/2017 (acquisition date). Could you please advice on the legal aspect of this and the best way to split Company A and B since the date of acquisition? From Companies House and HMRC point of view, I think both companies have to file accounts for this financial period as both businesses are ongoing.
Thanks!
Sam
Replies (4)
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If the assets haven’t yet been transferred, why are you considering preparing accounts on the basis of a fiction that they were transferred over 11 months ago. Accounts should be based on what occurred.
If there is to be a transfer of assets from the subsidiary to its parent, it will help anyone who wants to comment on the steps to be taken if you will detail the type of assets concerned. Do they include land or other assets that can’t be transferred by delivery? There must be at least one of those - A’s shareholding in its subsidiary.
Surely after 11 months the debtors will all have paid and the stock will all have been sold?
Hi Sam
Have you considered raising invoices by A to B for the use of A land, Building, machineries, furniture & equipment etc.?