Strategic restructure to protect IP

Reasons for a restructure

We were recently instructed by the CEO of a company that specialises in providing Mobility as a Service (Company). The Company developed an application to assist SEND (Special Educational Needs and Disabilities) individuals in using public transport safely and comfortably. The client was considering liquidating his company (Company A) and he wanted to protect the intellectual property (IP) within the business. At the same time the client wanted to make sure tax charges were not unwittingly created for the shareholders.

Our client approached us to create a beneficial corporate structure that would allow the IP to be transferred to another group company and proposed the use of a holding company.

Challenges

While the client’s objectives appeared straightforward, navigating statutory regulations and facilitating the transaction required our assistance to ensure ease and compliance.

Our Solution

1. Establishment of a Holding Company and New Group Company

We began by establishing the holding company and a new subsidiary group company (Company B). The use of the holding company presented multiple benefits for the client. Primarily, it reduced trading risk to the client, by the subsidiary partaking in the business area instead of the holding company. Additionally, the structure provided for greater asset protection in the event of an insolvency, whereby the holding company holds assets instead of subsidiary.

A noteworthy aspect of this transaction was the creation of a Certified B Corporation within the new group structure. Gannons provided Articles of Association for this new company that complied with the rigorous standards required for B Lab certification, supporting our client’s social and environmental mission to achieve transparency and accountability.

2. Implementation of Share for Share Exchange

We facilitated a share for share exchange between our client, as the shareholder of Company A, and the Holding Company. This process required meticulous attention to statutory requirements related to stamp duty and capital gains tax relief.

• Stamp Duty Considerations: Stamp duty is generally payable on transfers of shares where the consideration paid exceeds £1,000. For a share exchange to qualify for stamp duty relief, certain conditions must be met, including the requirement that an individual retains the same proportional control and value of shares in the company before and after the exchange
• Capital Gains Tax Considerations: Capital gains tax (CGT) liability can arise from transactions resulting in a gain. If our client had transferred his shares and received more money than he originally paid, he would have been deemed to have made a chargeable gain for CGT purposes.

Once the client had agreed to the proposed structure, we reviewed and prepared the documentation to effect the new holding company structure and share for share exchange. This included: -

• Articles of Incorporation for the B Corporation
• the letter to HMRC for advance assurance of tax reliefs
• the share exchange agreement
• the stock transfer forms
• the board minutes
• the Companies House forms
• the Shareholder resolutions
• other ancillary documentation

Outcome

Gannons successfully implemented a clear plan for the restructure, providing a strategic solution that safeguarded our client's intellectual property and supported his business objectives.