NICHE FEATURE
To restructure
or not to restructure That is the question Rik Pancholi of Pattersons Commercial Law asks
S
o, here’s the scenario. You started up in business many years ago and at that time you just wanted to see how things would go. You then built it up over a number of years and have accumulated profits year after year. As things were going well, you used the surplus cash in the company bank account to make investments. You may have bought a property or two or you may have expanded the business in a diversified manner. You may have even bought other businesses within the same company using the surplus cash. This is a great position to be in. What’s wrong with this scenario? Well, arguably nothing really, because it’s quite a strong success story. But what’s the risk? The risk is that you may make your business unattractive to a potential purchaser because it looks like a complicated business structure or you may not have planned properly for your retirement and there may be a much more tax efficient manner in which
you can structure your property investments. There could always be the unfortunate scenario that your main business is subject to litigation or another form of attack which could potentially jeopardise all other assets owned by the company, including those assets which are far more difficult to extract from the company such as those lovely investment properties. If there are multiple shareholders, is everyone on the same page in relation to the risk profile and the future intentions of the company? What if the shareholders want different things? Often, we come across companies that have no shareholders agreement and therefore, no predefined agreement on how to resolve disputes or what is to happen in the event of death. So, the question then becomes what can you do about this? One of the obvious answers is not to do anything because you’re under no obligation to change! The strategy seems to have worked so far, so why incur
REMEMBER THAT PUTTING A BUSINESS UP FOR SALE COULD ALSO MEAN PLANNING FOR SUCCESSION TO YOUR MANAGEMENT TEAM
the costs in making any of those changes if the risks identified are not really of any concern? Alternatively, if you’re concerned about those risks, you can use this opportunity to restructure your business in a way that firstly protects your investment properties or other appropriate assets and secondly, gears your trading business up for sale if that is something you want to do in the future. Remember that putting a business up for sale could also mean planning for succession to your management team or passing the business down to your family. How can we help? As corporate lawyers who advise regularly on these types of transactions, we simplify the complex commercial law area around share for share exchanges, share capital reductions, dividends in specie and demergers. Our role is to help you mitigate your risks, achieve your objectives and think about the bigger picture. Call Rik on 0116 319 1110 for more advice. NICHE | 33
