In this section we’ll look at some of the most important aspects of group restructure projects, and how we guide clients through the process to ensure that everything is completed successfully.
A group may decide to restructure for many reasons. Preparing for an IPO, sale, demerger or other similar event. Responding to changes – whether in regulation, the economic environment or other things. Strategic moves like changing the group’s business model, or streamlining operations to reduce costs and admin. And many more.
Whatever the motives for a Corporate restructure, they are complex and important projects. A group’s structure is absolutely fundamental – it defines its component parts, how they relate to each other, and how they interact with the outside world.
So any restructure carries risks. If the legal aspects are not planned and implemented correctly, many different problems can occur, such as:
- Breach of regulatory approvals, potentially stopping the group from conducting business
- Tax fines, penalties, adverse assessments and double (or multiple) taxation of the same underlying profits, as well as time-consuming and costly tax investigations
- Pensions liabilities being triggered, which can incur costs far in excess of the values of the underlying assets
- Loss of assets when removing legal entities
- Personal liability risks for directors of participating legal entities
- Failure to achieve the optimum valuation on corporate finance transactions, if prospective purchasers or investors apply a discount due to legal, transfer pricing or other tax risks
The key to success is following the correct process. Understanding the group’s existing structure; creating a new structure which achieves the desired objectives and also matches the reality of how the group operates; spotting any problems that the change might create; and making sure that all the key people within the group understand and support the project. Of course, the specifics of the process are unique to each project.
This process has many similarities to projects we work on with the intercompany agreements, and indeed many group restructures require ICAs to be amended anyway.
Let’s look at some of the most important aspects of group restructure projects.
Preparing for IPO, exit, significant investment or refinancing
Global value chain restructuring
Legal entity reduction
Intercompany debt streamlining
Typical legal elements of cross-border restructuring projects
Key areas of legal risk in cross-border restructuring projects