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Restructuring: Do You Need To Simplify Your Business Structure?

At EQ, we are strong believers in the mantra “keep it simple”. In our view, it’s easy to get caught up in the “latest thing in taxation” but sticking to your straightforward and uncluttered core principles has never been more important.

The primary issue in all structuring thoughts is whether it is FULLY understood by all parties, most importantly the business itself and its owners.

For example, the use of preference shares has gone in and out of fashion over the past 25 years. We came across a family company recently where, following a partial management buyout, the company was left with ordinary shares, redeemable preference shares, 3 classes of non-redeemable preference shares, loan notes and bank loans! The complexity of the structure allied to a very badly drafted shareholders agreement, left the company unable to make proper decisions and cost it a chance of an external disposal. Our Transaction Taxperts worked to simplify the structure so that it is understandable, but more importantly workable. In summary, our job is to solve problems, not to create them.

In our view, many tax advisors lose sight of commerciality and even common sense in recommending certain planning. EQ’s structure, where we have a team of three for every client dealing with all aspects, means that we know the client better, understand their circumstances and objectives, while providing relevant, practical advice. These are the fundamentals of great tax planning. Having three members to a client team also ensures that a balanced perspective is provided.

Our Taxperts have also assisted a local company to find a structure for a management buyout, followed by an external sale in due course. The existing share structure had 6 different classes of share and the accompanying articles or associations had made any disposal impossible. EQ appointed solicitors and worked with them to restructure, and simplify the existing shares, followed by a fully researched management buyout with no adverse tax consequences. The outcome is a restructured entity, with a team incentivised to grow the business, and an onward sale in mind. The clear message is to “keep it simple”!

You can read our previous article on ‘Have You Considered How To Exit Your Business If You Don’t Have A Buyer?’ here.

If you would like more information, or want to discuss your circumstances, please get in touch with our Transaction Taxperts today via [email protected] or call one of our offices.

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