This article forms part of our guide to corporate simplification and legal entity reduction projects. Links to the other parts of the guide are at the end of this article.
Decision trees or flowcharts http://en.wikipedia.org/wiki/Flowchart can be a useful tool in corporate simplification projects, where a significant number of companies need to be dealt with.
The advantages of using decision trees include:
- Faster and more accurate decision-making
- The standardisation of the process, with the opportunity to capture improvements over time
They are particularly useful when combined with standard suites of template documents for dealing with each of the outcomes identified by the flowchart.
Sample decision tree for removal of UK company by strike off
A sample decision tree for striking off a UK private company limited by shares can be downloaded by clicking on the following link. (This example does not use the conventional shapes for the questions / decisions).
This decision tree assumes that appropriate due diligence has been carried out (and that no issues have been identified), and that all third party creditors are to be satisfied in full.
The specific data needed for the decisions in this flowchart includes the following:
- The net asset position of the company
- Whether it has non-cash assets
- Whether it has third party creditors
- Its distributable reserves position
- Whether the company has more than one beneficial shareholder
The flowchart then indicates which legal actions are likely to be appropriate prior to strike off. This may include:
- Waiver of debts
- Transfer of assets at book value
- Transfer of assets at market value
- Solvency statement procedure to reduce capital by cancellation of shares
- Solvency statement procedure to reduce capital by subdivision of shares
- Dividend of cash / distribution of debts in specie
Other data and dependencies
Depending on the project, it may be useful to create decision trees which use additional types of data or dependencies. This may include:
- Particular regulatory issues which may affect companies identified for removal
- Particular tax issues
- Contractual issues with, or consents required from, particular third parties
- Overseas issues
Read the other parts of this guide to corporate simplification projects: