It is not uncommon for a business to find that, after having undertaken an acquisition or many acquisitions, they end up with a group structure that is unclear and which creates a compliance nightmare. Such a position can be amplified where the acquisitions themselves are of small groups of companies, with a holding company and trading subsidiaries.
The Milsted Langdon Restructuring team, with the assistance of one of its MGI partner firms, have recently undertaken projects for two large multinational businesses, one in Pharma and the other in IT, that had spent years acquiring suitable businesses to add to their organisation, but ended up in this very situation and had concluded that it was time to rationalise the structure and clear out the “dead wood”.
Group restructuring exercises are never straightforward, not only because of the parent/subsidiary relationships that exist, but also due to the desire to make sure all assets (in particular, intangibles) are retained.
Part way through one of our projects, we discovered that one of the entities being removed from the group, was the owner of a Patent that was registered in multiple jurisdictions across the globe. It was necessary, therefore, to undertake an exercise of considering whether this was still required and if so, getting the ownership distributed up the corporate structure to an appropriate entity and updating the various legal agreements in place.
Another complexity that we experienced was in relation to Corporation Tax groups and VAT groups and the incorrect allocation of payments by HMRC, that it was necessary to resolve in order to obtain clearances required.
The planning is therefore crucial and is something that the team at Milsted Langdon can assist with. The aim is to use the Members Voluntary Liquidation (“MVL”) process to distribute any assets up the structure (often via multiple steps) and to close the target companies down, removing them from the group. Whilst it is possible to do this without an MVL, we find that clients often gain comfort from the rigour of the process, not least because some group companies will have been inherited and no one now in the organisation knows much, if anything, about them. Having an independent third party take over responsibility for them therefore seems a prudent step.
If you believe that any of your clients might benefit from a group rationalisation, or one of the other benefits that can come from a solvent liquidation, please do not hesitate to contact us to find out how we could help.