Company Structures


The impact of the coronavirus has prompted businesses to reflect on ways to safeguard their long-term success. One consideration that may arise is whether there are better methods to protect your primary assets.

Preserving core assets is vital for ensuring the sustained prosperity and viability of your business. However, concentrating all these assets on a single balance sheet exposes them to significant commercial risks. Such risks can materialize when venturing into new endeavors or encountering unforeseen circumstances, like the recent pandemic.

One potential solution is to establish a group structure with a holding company. But what exactly are group structures, and are there any drawbacks to their implementation? Continue reading to discover more.

What constitutes a group structure? A group structure emerges when one limited company possesses another limited company. The topmost company in this structure is commonly referred to as a “holding company.” A holding company can have numerous subsidiaries—companies under its control.

There are several reasons why a group structure is established. In most cases, it aims to isolate or protect hard-earned assets within the holding company at the pinnacle of the structure. This shields them from the commercial risks associated with any trading company or subsidiary operating underneath. Consequently, it is crucial for the operational activities related to the holding company to be minimal, with subsidiaries carrying out the majority of the tasks.

What are the advantages of a group structure? Implementing a group structure offers numerous benefits. However, the top three advantages are as follows:

Asset Protection

A group structure enables you to safeguard business assets accumulated over a company’s trading history. This shields them from the day-to-day commercial risks inherent in running a company. Assets such as property and cash can be placed within a holding company. However, equipment like plants or vehicle fleets are best situated in separate subsidiaries instead of the holding company. Correct structuring is crucial to prevent the holding company from being exposed to any commercial risk.

Consider the example of a property. Suppose you acquire a commercial property for your operations and purchase it through your main trading company. If there are sufficient retained reserves in the existing limited company, a group structure can be established, allowing the asset to be transferred to the holding company. While this frees up your trading company’s balance sheet, it is essential to heed your accountant’s advice when transferring any asset. Failing to do so correctly could leave the asset vulnerable to potential risks, such as creditors in the event of liquidation.

Tax Advantages

Group structures offer several tax benefits. For instance, when moving property within the group, there are no stamp duty implications. Additionally, shuffling other assets incurs no tax consequences. For example, if you transfer plant and machinery from one trading company to another subsidiary, there are no tax implications there either.

Furthermore, if one of your subsidiary companies incurs a loss, you can offset it against profits from other entities in the group. Thus, group structures can prove to be a tax-efficient solution in addition to asset protection.

Business Advantages

A holding company simplifies the process of adding new subsidiary companies to your group. As your business expands, you can create additional units through new limited companies. This also allows for the inclusion of other shareholders (subject to appropriate advice) who seek to benefit solely from that specific business unit, rather than the entire group.

What are the disadvantages of a group structure? Naturally, group structures may not be suitable for every business, and several factors should be considered before establishing one. Firstly, a group structure entails additional accountancy fees, as multiple sets of accounts and corporation tax returns must be completed.

Furthermore, there are tax implications and disposal issues to consider if you wish to sell only a portion of your group. In such cases.