Technology Company Restructuring

Corporate Tax | Business Structuring

A fast-growing technology company approached us for advice on restructuring its corporate group. The company had started as a simple UK limited company but had expanded rapidly, acquiring subsidiaries, establishing overseas operations, and taking on external investment. The corporate structure had evolved organically over several years and was no longer fit for purpose.

The existing structure created several problems. There were inefficiencies in the flow of funds around the group, with profits trapped in entities where they could not easily be accessed. The intellectual property was held in a suboptimal location from a tax perspective. The structure did not facilitate the founders' long-term exit planning. And the complexity was creating ongoing compliance costs and management time.

The shareholders' objectives were clear: they wanted a simpler structure that would facilitate future investment rounds, allow for tax-efficient extraction of profits, protect key assets, and position the group for an eventual trade sale or IPO.

We began by mapping the existing structure and identifying all the entities, their functions, their intercompany arrangements, and their tax attributes. This revealed several legacy issues that needed to be addressed, including dormant subsidiaries, historic intercompany balances, and arrangements that no longer reflected commercial reality.

We then designed a target structure that would meet the shareholders' objectives. This involved:

• Creating a new holding company to sit at the top of the group, which would facilitate future investment and provide a clean exit route for shareholders.
• Restructuring the intellectual property holdings to ensure they were held in an appropriate entity with proper licensing arrangements in place.
• Simplifying the subsidiary structure by eliminating dormant entities and merging others where commercially appropriate.
• Putting in place new intercompany arrangements that reflected the actual functions, assets, and risks within the group.

The restructuring required careful sequencing to ensure that each step qualified for available tax reliefs. We worked closely with the company's accountants and corporate lawyers to implement the changes over a six-month period, preparing board minutes, shareholder resolutions, and the necessary filings.

We also prepared a detailed paper setting out the tax analysis for each step, which the company retained for its records in case of any future HMRC enquiry.

Outcome

Complete group restructuring implemented over six months.

New holding company established, IP holdings optimised, dormant entities eliminated, and new intercompany arrangements put in place.

The group is now positioned for its next phase of growth and eventual exit.

This case study is based on a real client matter. All identifying details have been removed or changed to protect client confidentiality.