Our third article on reorganisations addresses items to look out for as you embark on this process.
You need to ensure that the correct steps are taken to avail of the stamp duty relief and to ensure that the businesses can continue to operate post restructure.
Things to watch out for:
Company Law
Profits available for distribution
- In the case of a three party share for undertaking swap, the directors of the transferring company must investigate and consider if the company has sufficient profits available for distribution to facilitate the transaction. If this is not the case, the Summary Approval Procedure is required to comply with Section 91 Companies Act 2014. The Summary Approval Procedure has it’s own considerations.
Connected Parties
- Where the re-organisation involves a transaction between a company and its directors or other company controlled by its directors, the directors of both companies must consider section 238 of the Companies Act 2014 and ensure the appropriate resolutions are put in place.
Operational
Assets
- It is important to understand whether any assets or undertakings proposed to be transferred as part of a re-organisation are subject to security granted to a financial institution and how the restructure will affect that security.
Employees
- The European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 will apply in circumstance where a business or undertaking is transferred as part of a re-organisation, which includes an obligation to give employees at least 30 days notice.
Property
- Consideration must be given to where the transferred business or the acquiring company will operate from. It is important to ensure a lease is put in place, as required.
Contracts
- Companies should review their contracts to understand and put in place the necessary steps to assign or novate their contracts.
Tax
- Tax reliefs are available in respect of share for undertaking three party swaps and share for share exchanges. It is important to ensure, in consultation with tax advisors, that the necessary conditions are met and to consider any clawback provisions which might arise in the future.
Please contact Conor Mullany, Elaine Keane or Conor Mullins of MWM for more information.
This article is for general information purposes only. Legal advice must be obtained in each individual circumstance. Whilst every effort has been made to ensure the accuracy of this article, no liability is accepted by the author for any inaccuracies.
Please note that MWM are not tax advisors and do not provide any tax advice.