Our specialist Corporate Solicitors can assist you and your business with the full range of intra-group reorganisations, including transfers and demergers.
We are able to structure and deliver practical and effective solutions to meet your requirements.
An intra-group reorganisation is usually the transfer of assets within a group of companies that is undertaken for the purpose of reorganising the group’s structure and the way it carries on business.
An intra-group reorganisation can apply to a large or small transfer of assets or purchase or sale of a company within a group.
Why Carry Out a Group Reorganisation?
Businesses carry out intra-group reorganisations for a number of reasons including:
- To boost administrative, operational or economic efficiencies (for example, centralising business support functions, such as accounts, public relations and human resources or creating greater economies of scale through combining the purchasing power of the group in relation to suppliers, stock and for raw materials);
- As a precursor to an acquisition or sale of a company or business (for example, the target wishes to sell part but not all of its business, or it wishes to amalgamate its business to provide a greater opportunity for a potential purchaser);
- After an acquisition of a company or business (for example, the business and/or assets may be hived up, down or across into another existing operating group company or land or intellectual property may be transferred to another group company and leased back to the operating company; or
- To secure tax advantages and create a more tax efficient group structure (for example, rearranging cash flows, transferring property and assets, amalgamating subsidiaries or creating new companies).
Taxation
When selling shares or assets in the course of a reorganisation, there are a number of taxes that potentially arise. These include:
- Stamp duty is chargeable on shares, other marketable securities and certain transactions involving partnerships;
- SDLT is chargeable on the transfer of property;
- An asset sale is subject to VAT unless the assets that are the subject of the transfer are exempt. However, no VAT is chargeable where it can be shown that business assets are transferred as a going concern (TOGC) within the meaning of article 5 of the VAT (Special Provisions) Order 1995).
Implementation
Intra-group transactions are often implemented and documented in a less formal way than arm’s length transactions. For corporate governance reasons, however, it is advisable to follow proper process (for example, seeking consent from third parties where required, satisfying bank requirements and compliance with TUPE) and to properly document reorganisations.
