How to Streamline Your Group Structure - In Six Easy Steps

• published: 02 Mar 2015
• views: 0

I recently completed an exercise to help a client to streamline its group structure and it was so straightforward the client is delighted.What was the problemThe group had grown by settingup new companies for each new business area and then giving a shareholding in each subsidiary company to its key team members. This had really incentivised the management team and the principle had served them well but it had also created a cumbersome group structure with lots of internal transactions that required a lot of accounting payroll and admin effort to move income and costs around the group. We were already talking about restructuring the group and I advised them to take the opportunity to streamline the group structure at the same time.This is what we did.Select the companies to streamline. In our case we identified those subsidiary companies that had more internal transactions than external transactions and we selected a new home for them inside a bigger trading subsidiary. The plan was to transfer the trade and employees to a new home within the group and to dispense with the smaller subsidiary companies. This highlighted six small companies that could be streamlined with a corresponding reduction in administration effort and cost.Identify the principal stakeholders. This meant identifying the customers employees and suppliers that had a contractual relationship with each legal entity. These details were easily obtained from personnel records the sales ledger and the purchase ledger.We checked the terms of each contract for 'change of control' clauses and then determined the communication strategy and TUPE discussions for employees to advise them of the proposed changes.Agree a timetable. We chose a calendar monthend in 2 month's time to give ourselves a comfortable timetable. This was also an accounting monthend which made for a clean cutoff and an easy way to get the values of the assets and liabilities to transfer.Appoint a solicitor. We contacted the client's own solicitor and explained what we wanted to do and how we wanted to do it. We said it would all be very straightforward and we received a sensible quote for drafting the transfer documents and board minutes.Communicate. We implemented the agreed communication strategy. It was all very straightforward as all of the employees customers and suppliers were staying within the group. We advised HMRC the bank insurers and auditors of our intentions and they were all very supportive.Implement. On the transfer date we signed the board minutes and the employees transferred over to new contracts of employment they were the same terms and conditions that continued over from the previous contracts but with a new group employer name on the contract. We produced a trial balance and attached that to the transfer documents to show the value of the assets and liabilities that had transferred to the new group company. We kept the sales ledger and purchase ledger running for the 'old' companies and as money is paid or received we transfer it to the new company. This avoided transferring individual invoices and eventually they will runoff to zeroadsbygoogle window.adsbygoogle .pushadsbygoogle window.adsbygoogle .pushThe benefits to the client are clearly visibleIt now takes half the time to produce the monthly accounts.There are fewer supporting schedules and calculations required.Time previously spent moving money around the group for no commercial benefit is now spent productively.Employees and customers support it as they see it as a commonsense move.It is generating a great return on investment for the time and effort required to implement it.The result is very happy clientDo you have similar experiences that you want to shareIf you found the article interesting then maybe you would like to share it or if you would like to comment then I would be delighted to hear from you either on this site or at mjonesfinexec.co.uk