When Does an Intra-Group Reorganisation Make Sense?
Once a business has more than one company, the structure does not always stay as it started.
You might acquire another business, launch a new venture, build up valuable assets or start planning for an investment or sale. Over time, you can find that businesses and assets are no longer sitting in the best place.
That is where an intra-group reorganisation can help.
Despite the technical name, the idea is straightforward: rearranging companies, businesses or assets within a group so the structure works better for what you want to do next.
Why might you reorganise a group?
There are lots of reasons.
You may have bought another business and want to integrate it into your existing group. Two different businesses may have grown inside the same company. Property or intellectual property may be sitting somewhere that no longer makes sense. Or the group may simply have become unnecessarily complicated.
A useful question to ask is:
If we were structuring the business today, would we do it this way?
If the answer is no, it may be time to look at the structure again.
After an acquisition
Buying another company is a common trigger for a reorganisation.
Once the deal is complete, you may find that the acquired company owns a mixture of businesses and assets that do not necessarily fit neatly into your existing group.
For example, you may want to move one part of the acquired business into your existing trading company while holding property or other valuable assets elsewhere.
A post-acquisition reorganisation allows you to look at what you have bought and ask: Where should each part of this business actually sit?
Where should each part of this business actually sit?
Sometimes one company simply grows into several different businesses. Imagine ABC Trading Ltd started with one activity but now operates both a manufacturing business and a technology business.
Rather than keeping everything together, you might move towards:
ABC Holdings Ltd
↙ ABC Manufacturing Ltd
↘ ABC Technology Ltd
Both businesses remain under the same overall ownership but operate through separate companies.
That can make sense where they have different customers, management teams, funding requirements or levels of risk.
It can also give you more options later. You might want an investor in one business but not the other, or eventually decide to sell one while keeping the other.
Getting ready for investment or sale
Structure becomes particularly important when a transaction is on the horizon.
Suppose a buyer wants one part of your business, but you want to keep everything else.
If the businesses are already in separate companies, it may be relatively clear what is being sold.
If they are all mixed together, you may first need to separate the business being sold.
That can mean working out which employees, contracts, assets, intellectual property and liabilities belong with it.
The same applies to investment. If an investor is interested in one particular part of the business, having that activity in its own company may give you greater flexibility over exactly what they are investing in.
Thinking about these issues early can make a future transaction much easier.
Sometimes the aim is to simplify
Reorganisation does not always mean adding more companies.
A group may have accumulated companies over the years through acquisitions, old ventures or previous restructurings. Some may no longer serve any real purpose.
Simplifying the group can make it easier to manage and easier for banks, investors or a future buyer to understand.
Sometimes the best reorganisation involves removing boxes from the group chart rather than adding them.
How do you actually move things around?
This is where some care is needed.
There is an important difference between moving shares in a company and moving the business and assets owned by that company.
If shares are transferred, the company itself continues to own its assets, employ its staff and remain party to its contracts. What changes is the ownership of that company.
Moving a business is different. You may need to transfer individual assets, contracts, employees, property, intellectual property and liabilities.
That can mean dealing with banks, landlords, customers, suppliers or other third parties along the way.
So before deciding how to reorganise, the first question should always be:
What exactly are we trying to move?
But they're all our companies -does it really matter?
Yes.
Commercially, you may think of the group as one business. Legally, each company is separate.
If one company owns a property, another group company does not automatically own it. If a contract is with Company A, Company B does not automatically become party to it.
Transfers within a group therefore still need to be properly considered and documented.
You may also need to think about the value at which assets are transferred, existing bank security, contractual restrictions and third-party consents.
Being “intra-group” does not mean those issues disappear.
What about tax?
Tax will often have a significant influence on how a reorganisation is carried out. Moving shares, businesses, property or other assets between companies can have tax consequences, and the order in which different steps happen can matter.
That is why the legal and tax advice should be considered together from the outset.
The best place to start is not with the technical steps. It is with the end result:
What do you want the group to look like when you are finished?
Once that is clear, your legal and tax advisers can work backwards to determine the best way to get there.
Is it time to review your group structure?
It may be worth taking another look if you have:
Acquired another business
Different activities are sitting in the same company
Assets are no longer held in the right place
You are considering investment or sale
The group has simply become more complicated than it needs to be.
There is no benefit in reorganising a group just to make the organisation chart look prettier.
But there is real value in making sure the legal structure supports the way the business operates today - and where you want it to go next.
How Daly McCormick can help
At Daly McCormick, we advise businesses on group reorganisations, including moving companies, businesses and assets within a group, simplifying existing structures and reorganising ahead of investment, acquisition or sale.
Working alongside your accountants and tax advisers, we can help you establish what you want the group to look like at the end of the process - and put the right steps in place to get there.
Your business. Our legal expertise.
Dungannon, Belfast, Omagh
02887441840
Disclaimer: The information provided here does not, and is not intended to, constitute legal advice. Instead, the information and content available are for general informational purposes only.
