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question about merging two companies...

question about merging two companies...

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Hi, 

I have a question about merging two companies.

Both companies have common shareholders and it's been decided that it would be easier to combine the two and report as one entity.

Company A isn't buying the shares of Company B - Company B will remain dormant after the switch and will most probably be wound up.

All contracts with customers, suppliers etc have been switched to Company A.

If Company A takes on the Fixed Assets, the debtors & creditors of Company B and any intercompany balance between the two is written off, Company B should just have share capital and reserves (losses) left over.

I'm just wondering what happens to the losses/reserves in Company B, can they be transferred to Company A?

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By gbuckell
22nd May 2015 10:55

Merger

Why would you want to transfer losses from Co B to Co A?

Are you comfortable there is no goodwill in co B? If it has been transferred for nil consideration there is a tax charge on its market value within co B and a distribution to the shareholders.

If there is any doubt I would have had co A acquire the shares of co B in exchange for an issue of shares and then transfer the business which can now be done tax-free as it is intra-group.

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