To restructure or not to restructure

To restructure

or not to restructure

That is the question Rik Pancholi of Pattersons Commercial Law asks

So, 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 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.

REMEMBER THAT PUTTING A BUSINESS UP FOR SALE COULD ALSO MEAN PLANNING FOR SUCCESSION TO YOUR MANAGEMENT TEAM

Talking

legacies

From divorce to death, we hear about the difficult stuff no one wants to talk about until it’s too late. We interviewed a client of our resident will writer Satwinder Sidhu of

Paradigm Wills & Legal Services to uncover their thoughts on life and death and why they wrote a will

THE CLIENT

Mark and Diana Esho are a husband-and-wife team. They set up Easy Internet Services in 2000, one of the first digital marketing agencies in the Midlands. In 2004, they set up Easy Internet Solutions, a web hosting and domain registration provider based in Bournemouth. They have other business and social interests which include a project that sends recycled bras to Africa and an app that allows disabled people to submit disabled access reviews on public venues across the country.

What was your number one reason for getting a will?

Diana Covid has taught us that life is unpredictable and short. Everyone should get a will to protect their family.

ALTHOUGH COVID HAS BEEN CHALLENGING IT HAS GIVEN US THE OPPORTUNITY TO TAKE STOCK OF OUR BUSINESS AND PERSONAL LIFE How did the pandemic affect you?

Diana Although Covid has been challenging, it has given us the opportunity to take stock of our business and personal life. For instance, we realised we didn’t need an office and sold it. We also sold half of the shares of one of our businesses. This has given us the opportunity to step back from our businesses and work on passion projects and have a much better work-life balance.

What did you learn from writing your will?

Diana It is a very specialised industry which is constantly evolving. Very difficult to navigate as a novice. We learnt cost-effective ways in which to protect our estate and family. We chose Paradigm for our wills and estate planning because it’s an established firm with a great reputation. We needed to protect our estate, family plus inheritance tax planning.

Did you speak about finances, death, and inheritance before meeting Paradigm?

Mark Yes, it has been a constant topic over the last ten years. Covid has taught us not to be complacent when it comes to planning for the future. It is imperative to make a will and plan any potential inheritance liability.

Tell me about how you grew up and the effect that has had on you today

Diana We started from scratch with no handouts or help from anyone. This has given us a different perspective on money. Initially, it was all about designer clothes, watches, cars, luxury holidays, etc, but you soon realise it doesn’t bring you happiness. Mark Money definitely makes your life easier, but true freedom and to a certain extent, happiness, is being completely debt-free and having the ability to work when you want, not because you have to.

How do you hope to be remembered?

Mark For making a difference in the lives of others and inspiring others to reach for the stars.