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Brexit planning and corporate restructuring

With the UK’s withdrawal from the EU approaching, English corporate groups may be evaluating the benefits and need for corporate restructuring to an EU jurisdiction.

Where an English corporate group has an EU presence or EU based subsidiaries, it may make commercial sense to place a new EU holding company at the top of the corporate structure. This might be particularly relevant to groups that consist predominantly or exclusively of non-English subsidiaries.

In terms of commercial objectives, moving all such subsidiaries so that they are directly owned by an EU based holding company ensures that the group remains under the EU jurisdiction when the UK leaves. It can remove some of the uncertainty as to what the post-Brexit English jurisdiction may be and could minimise issues arising from any divergence of the English system. Clients may also want to consider restructuring with an EU based holding company if such a presence would further any future plans for growth within the EU market.

Ashfords has been advising on several such restructurings for corporate groups, in particular setting out the mechanisms by which an EU holding company can obtain ownership of non-English subsidiaries in a tax efficient manner. This can be achieved by the shareholders incorporating a new holding company in the EU, with minimum capital in the same proportional ownership as the existing English holding company. Whilst it can be incorporated in any EU member state, current experience shows that the Netherlands is the preferred choice for new companies.

Incorporating with the same proportional ownership allows for a share for share exchange. Ashfords has been able to advise on how this mechanism allows for the acquisition of shares to qualify for stamp duty exemption, providing the transaction is for genuine commercial reasons and not as means for a person(s) to gain control of the group. We have also been able to outline how, providing it meets the requisite conditions, the existing company may also benefit from the substantial shareholding exemption from corporation tax on chargeable gains made on the disposal of shares.

Given the uncertain climate of Brexit and the commercial need for some groups to be held within the EU’s jurisdiction, corporate restructuring to an EU based holding company may be solution that more clients look to implement as part of their ongoing Brexit planning.

If you would like any further information about corporate restructuring of holding companies to EU member states, please contact Angus Bauer on  a.bauer@ashfords.co.uk.

 

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