Paul Fursman
Company & Commercial
Is a holding company the right structure for you?
There are various ways in which a business can alter its structure. It could be by changing the class of shares, changing the structure for tax or even separating different elements of the business into a Group Company structure with the introduction of a holding company.
The benefits of a corporate holding structure
There are a lot of different benefits that will depend upon the type of business. These will include:
- Protecting against insolvency risk – where a subsidiary becomes insolvent, (subject to any element of wrongdoing) the insolvency practitioners are not able to sell the assets held by another group company. Furthermore, if there is intellectual property (IP) ringfenced in a holding company a purchaser of the insolvent subsidiary would need to pay to license the IP from the holding company.
- IP Ringfencing – IP is often one of the most valuable assets a company can hold, ringfencing this into a holding company can mean that the IP is potentially protected from litigation, financial difficulties or insolvency.
- Retain assets on sale – using a group structure with a holding company allows the owners of the parent company to retain certain assets on a sale of the rest of the business and other group companies. This can allow the owners to retain valuable assets and revenue stream especially if the asset is something like property which can be leased back to the buyer.
- Consistency – holding assets in a holding company can alleviate any risk of rights being held by different companies.
- Balance sheet – assets can be set out as separate assets on the holding company balance sheet.
James Bowles a solicitor in the commercial department says:
“As you grow your business both opportunities and risk increases. A way of addressing these changes is by looking at changing the structure of your business.
If you would like assistance or advice as to whether changing your company structure into a Group Structure is right for you Mullis & Peake will be happy to assist. For further advice and assistance please contact our Commercial Team.”