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The Advantages of Business Restructuring


Business restructuring refers to the reorganisation of a company structure, often to make the business more profitable or to simply become better organised. There may come a time when a business may need to revisit its corporate structure, often during difficult operating times. However, restructuring can also be undertaken by a business simply looking to increase its profits and reduce tax liabilities.

If you think your business has outgrown its existing company structure, or it’s struggling during the coronavirus pandemic, then it might be time to consider your restructuring options in order to improve efficiency and prevent your business from failing.

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The different types of business restructuring 

There are four types of business restructuring your firm might want to consider:

  • Demerging and splitting a group structure – As a firm grows, objectives may no longer align or shareholder differences may be unresolvable. In this case, it is often better for companies to operate separately.
  • Consolidating businesses into a group structure – In some cases, businesses that operate separately may work more effectively together. Consolidating, and therefore simplifying, the group structure could be beneficial.
  • Establishing a new holding company – A new holding company will allow your firm to own shares or assets in subsidiaries where the holding company can manage and control them.
  • Share reorganisation – The reorganisation of shares could include capital reductions, alterations of rights or the purchasing of shears. This could be beneficial for firms looking to attract new investment. 

The advantages of restructuring

Whatever industry you are in, and whatever your reasons for considering a business restructure, there are many benefits to doing so.

Decreased costs and increased efficiency

If restructuring consists of consolidating multiple companies, you could benefit from a reduction in compliance costs, such as the preparation of annual accounts or VAT returns. This can also lead to a reduction in administration costs.

Reduced risks

A new subsidiary or company could reduce your financial risks if there are concerts around certain departments making losses. For example, if your firm holds property assets, holding them in a separate company could help to safeguard them.  

New investment opportunities

You may decide to restructure your organisation if obtaining more investment for your company is a priority. For example, those who operate a limited company might find their external investment opportunities are limited. However, a simple restructuring of your business for investment purposes could open many more doors to external investment opportunities.

Resolve shareholder disputes

If key shareholders have come to a deadlock as to how to take your business forward, restructuring could be your answer. A demerger or share redistribution (where a shareholder is bought out) is an effective way to resolve such disputes.

Greater employee satisfaction

While some companies may offer bonuses or other perks to their employees, some may go further and offer shares in their business. Offering an employee share scheme is a good way to restructure for the benefit of your employees, thus increasing employee loyalty and satisfaction.

Improved tax-efficiency

One of the key benefits of business restructuring is increased tax-efficiency. Reorganising your company structure can create a more tax-efficient corporate structure. However, it’s important to see professional legal and financial advice to ensure your restructure takes advantage of tax reliefs.

John McCaffrey, Tax Partner at Alexander & Co. leads a specialist business restructuring team. John explained that restructuring wisely will ensure your company becomes as tax-efficient as possible.

“One advantage of restructuring to a group structure compared to operating through separate companies is that groups of companies are provided with certain tax exemptions and reliefs regarding transactions between group members (subject to certain conditions being met).

Certain tax losses and reliefs can be utilised across a group as opposed to just in the company in which they arose. These would not typically apply if the companies were not in a group structure.

Assets can usually be transferred between companies within the same group are deemed to take place on a tax neutral basis for UK capital gains tax purposes, allowing assets to be transferred between group companies without such gain arising.

Subject to certain conditions being met, there are also exemptions from UK corporation tax in relation to profits from a disposal of shares in a subsidiary and reliefs from stamp taxes on the transfer of shares and properties between group members.”

For assistance with business restructuring and understanding the tax reliefs that your company could benefit from, contact Alexander & Co’s tax planning team today.

The post The Advantages of Business Restructuring appeared first on Entrepreneurship Life.

Carson Derrow 2020-08-02 07:37:00

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The post The Advantages of Business Restructuring appeared first on Market World.



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