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Setting up a holding company and a subsidiary

I would like to set up 2 companies and then make one a subsidiary by shae transfer

Hi,

I would like to set up two companies with myself the sole shareholder and director, and then transfer 100% of one company to the other, creating a wholly owned subsidiary. Then I might need to transfer 25% of the subsidiary to a possible business partner. The transfer to the holding company will be prior to the subsidiary starting to trade, but the transfer to the partner might be after we start trading. 

Is this easy to do? Any pitfalls I should be aware of?

Any help would be much appreciated.

Thank you,

Owen 

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22nd Feb 2019 10:37

owen7 wrote:

Is this easy to do?

Yes, if you know what you are doing.

owen7 wrote:

Any pitfalls I should be aware of?

Yes, taking action when not knowing what you are doing.

The fact that you have asked the question suggests that you don't have the necessary tax, accounting and company law knowledge to do this yourself. On that basis, the obvious solution is to appoint an accountant.

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22nd Feb 2019 11:00

I suggest you just ignore the above and forge on regardless, then appoint an accountant 18 months later when you need to file your accounts and they can tell you then what you got right and what you got wrong.

What's the worst that could happen?

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23rd Feb 2019 13:30

Pitfalls include not budgeting for accountancy and legal fees needed to set up and operate the structure...

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By owen7
23rd Feb 2019 19:32

Thank you all for your replies.
I am currently just trying to understand the viability and complexity of such a structure/process before I engage the appropriate professionals. I always prefer to have as much background knowledge as possible before consulting an expert so that I can choose the expert better and be able to understand their advice.
So any information would be much appreciated. Thank you.

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By DJKL
23rd Feb 2019 19:53

Subject to what you want to do being a sensible structure in the first place, and why you want that structure will have a bearing, the more obvious thing is set up company 1 with yourself as sole shareholder/director then set up company 2 with yourself as sole director and company 1 as sole shareholder.

You want to think about number of shares at outset re each and whether later transferring shares in Company 2 to new shareholder is the correct approach, it might be simpler for Company 1 to subscribe for say 75 shares in Co 2 and new shareholder to then subscribe for a further 25 shares in company 2, to avoid you having to bother with a share sale. Different share classes might be pertinent, there are lots of perms.

You do want an accountant and a solicitor day 1, you need to sort out how transferable shares in Co 2 will be , pre emption rights and sort issues like say loss surrenders from 2 to 1 and how this might square with the rights of the other shareholder in 2 and other aspects that might fit into a shareholders agreement etc.

Remuneration structures might also be on point and if both to operate from the same premises agreements re which company pays what etc would be useful.

Step one is checking with an accountant if the proposed structure fits with what you, and the other shareholder, might want to achieve .

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23rd Feb 2019 20:31

Too many people seem to believe that it is a simple matter of asking a question and getting the correct answer.

More often than not, especially in cases like this, it’s more important for the professional adviser to be asking the questions so as to be sure that the advice is appropriate to the circumstances and intentions.

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By owen7
12th Mar 2019 14:23

Thank you all very much for your replies.

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