In these challenging economic times there are many reasons why businesses and their owners could find it beneficial to reorganise the ownership of assets. Some of the benefits of such a reorganisation are:
- facilitating the raising of additional capital by separating areas of the business which are likely to be attractive to investors or lenders, from riskier parts;
- protecting valuable assets from operational risks, so that if the business fails, important assets are not lost (or potentially acquired by your competitors); and
- separating a profitable business from other struggling or riskier businesses, so that the failure of one part of the operation does not harm the rest.
One upside of the current economic climate is that the drop in value of some assets (including land and property) means that many planning opportunities offer greater efficiencies than in more buoyant times. This is particularly the case in relation to capital gains tax and inheritance tax planning for the purposes of retirement or succession planning for smaller businesses, and also for SDLT.
If you are considering a restructuring, some of the key issues in the context of any restructuring are:
- What is the best method, from the many options available, of funding the transfer?
- How can the risk of there being a subsequent challenge to the transfer by a liquidator or administrator be minimised?
- Are individuals who are directors of both the transferor and transferee acting correctly if they have a conflict of interest?
- Does the transferee require consent to transfer assets from, for example, creditors, shareholders or under other contracts?
- Are there any employment law issues arising out of a sale of a business, or part of a business?
- How should all aspects of the exercise be structured in order to minimise present and future tax liabilities, and to take advantage of tax planning opportunities?
Depending on your circumstances and priorities, there are a myriad of restructuring options available. Although complex tax and legal considerations can arise, the benefits to be obtained can be significant. It is important from the outset to take comprehensive advice allowing you to set clear objectives and to put in place the best plan to achieve those objectives.