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Parent/Umbrella company confusing situation

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A client would like to set up a new limited company that would act as a parent/umbrella for their current company and another company they are in talks with so the 2 would only share clients that have mutual needs between the 2 companies rather than going into a full partnership.

The goal of this is that the parent company would secure contracts and clients, and would then subcontract the 2 companies that they are in talks with to do the work depending on what the client needs and where they are if they need in person assistance. 

 

I’m not 100% sure how to go about this or if its even allowed and Google has been little to no help, currently the 4 directors, 2 from each company are wanting to become directors of the parent/umbrella company all with equal shares and control.

 

If anyone has set up something similar or has any advice I would appreciate it.

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By Tim Vane
02nd Jul 2020 12:11

It's OK if you are not 100% sure how to go about it, but what percentage would you say you are sure, so we know where to start?

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By paul.benny
02nd Jul 2020 12:17

This sounds like an unnecessarily complex arrangement that will incur ongoing fees and has plenty of scope for acrimony if the parties disagree.

You describe a scenario where two business have activities that complement one another. I would suggest a commercial agreement where they cross-refer leads etc. They could agree a some shared branding (eg ABC Tax and ABC Book-keeping).

Set the terms of the agreement in writing at the outset - for instance how to carry out marketing and how to share costs. In particular think about what happens when things don't go quite right or the parties disagree - eg claims, bad debts, one party unwilling or unable to carry out work referred by the other, etc. You'd need all of those things anyway if you set up a holding company.

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By johnt27
02nd Jul 2020 12:29

Sounds like a joint venture to me - so my immediate concern is that the structure proposed is upside down

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By Paul Crowley
02nd Jul 2020 13:39

Sounds confused. Why parent?
Agree sounds upside down
Why not just company three not owning or being owned by another company?

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