Our Company, which is a manufacturing Co, has no retained profits but owns a property and has a revaluation reserve on it balance sheet,as the property we have as gone up in value over the years. We would like to transfer the property out of the trading property and was thinking of setting up a holding company to do this.
I am told this is not possible unless we have any retained profits, is this true.
As I see it ,we can set up a holding company with the existing shareholders of the trading co. Do a share swap, so the holding Co owns the trading co and the shareholders would then own the holding co.
The trading Co could then sell property to holding Co and as a consequence the holding Co would then have a debt owed to the trading co.
As the property has then been sold, would the trading company's revaluation reserve then be transfered to the retained profits reserve and hence allow a dividend to be paid to the holding Co to pay off most of the debt the holding Co would have to the trading company. Are we allowed to do this and are there any tax implications if we do.
The purpose of the transaction would be to protect the shareholders assets should anything go wrong with the trading co.