Share this content

Holding company or not

client company with funds

Didn't find your answer?

I have a client who runs a successful limited company "Company A" with surplus funds.

The client also owns 1/3rd shares as an individual in another "new" company with two other shareholders.  One of these other shareholders want to sell out and my client wishes to buy these shares.  However, he wants his company A to buy the shares as it has the surplus funds.

I can't see a problem with this.  However, it has been mooted that a holding company (Company H) might be the best way of doing this but not sure if there's any advantage.  This would mean Company A having shares in Company H, which needs setting up, and then Company H buys the shares by way of an inter-company transfer.

Is this unnecessarily complicated or am I missing something ?

Replies (6)

Please login or register to join the discussion.

avatar
By Tax is always taxing
11th Jan 2022 10:43

Why would company A have shares in company H?

It really depends what they are trying to achieve. Is a holding co possible - Yes. Are there advantages - Yes. Is it the best option - that's where you make your money advising!

Thanks (1)
Replying to Tax is always taxing:
avatar
By SJRUK
11th Jan 2022 11:33

Because as the question says, Company A has the funds to buy the shares.
He doesn't personally.
He's trying to achieve buying the shares without incurring a tax liability by withdrawing the funds from Company A.
Unfortunately I don't hold all the answers and its not something I've had to deal with before. A a little guidance would have been helpful, even if it was to refer to a particular reference/source.

Thanks (0)
Replying to SJRUK:
paddle steamer
By DJKL
11th Jan 2022 12:00

Surely he creates Co H above Co A, distributes /lends up to Co H from Co A and Co H then buys the shares in the other company, so Co H ends up owning 100% of Co A and 33% of Co B.

Of course whether this is actually a good idea is a different question for which paid for advice is very advisable, for one thing we do not know what type of company Company B is, that may change our view as to whether Co H ought to hold shares in same (thinking ER and BPR)

Edit , should these days be BADR and BPR.

Thanks (0)
Replying to SJRUK:
avatar
By Tax is always taxing
11th Jan 2022 11:50

So company H isn't intended to be the holding company of the Group - but will be a subsidiary of Company A and hold the shares in Newco?

In which case its actually quite simple... "No, its pointless"

Thanks (1)
Replying to SJRUK:
avatar
By Leywood
11th Jan 2022 11:56

Time to buy in some advice I would suggest.

No shame in it.

Thanks (1)
avatar
By paul.benny
11th Jan 2022 11:45

SJRUK wrote:
... it has been mooted that a holding company (Company H) might be the best way of doing this...

Mooted by who? And what's their rationale for saying it 'might be best'?

Introducing a holdco adds complexity and cost. So you need to be clear that any advantages outweigh that.

Thanks (2)
Share this content