Services

Corporate Simplification

Legal Entity Reduction: Simplifying entity structures and exiting non-core businesses/operations

How do we help our clients?

We help our clients to simplify their legal structures, maximize value for shareholders and exit non-core businesses and operations.

Corporate simplification is an effective way of delivering long-term strategic cost savings and compliance benefits to an organisation. The Deloitte team advise on the most appropriate method to wind down, close and eliminate both active and dormant companies, acting as solvent members’ voluntary liquidators if circumstances dictate.

  • Simplifying a UK group structure: The elimination of legacy entities that serve no further economic purpose. Read more
  • Simplifying a global group structure with project management support: The elimination of legacy entities that serve no further economic purpose and the mobilisation of the Deloitte Global Network acting as project manager for multi-jurisdictional entity reduction projects. Read more
  • Strategic Asset and Investment Realisation (STAIR): Once an entity’s/group’s economic purpose has been achieved we ensure the asset realisations are maximised and funds are returned to shareholders through tax efficient repatriations. Read more
  • Managed Exit - wind-down and closure: We help clients to wind-down and close non-core live businesses and operations. Read more

Legal Entity Reduction – Simplifying a UK group structure

Introduction and key benefits

Points to consider

Before embarking on an entity reduction project these are some typical issues to consider.

Is there a good knowledge of the corporate history of the entities targeted for elimination? What legacy issues could remain within the entities and if so do I know how to deal with them, in an optimal manner?
Is there complete knowledge of all actual/contingent assets within the entities? If so, do I know how to avoid these assets potentially passing to the Crown upon dissolution? Likewise, failure to distribute assets correctly could cost thousands of pounds in additional taxation charges.
Do I know how to release trapped capital effectively, navigate lease savings and protect IP?

In short, it generally pays to take early advice before embarking on a entity reduction project. As a first step we would be delighted to discuss your needs and challenges, how to best address issues (for example those highlighted above) and how to structure a cost effective project that minimises the impact on your internal teams.

If you would like to discuss your potential project then please contact Stephen Browne.

Credentials

Case study 1

This major High Street bank had been eliminating companies for a number of years but the project had stalled due to the slow processing of data and the incumbent advisors’ fees exceeding budget, which was creating an internal risk issue and adding unnecessary cost to the various business units.

Key issues/considerations

  • Quickly reinvigorate the project and obtained buy-in from all the parties involved
  • Early wins identified for 80 companies (to be dissolved within 6 months)

Our role (or value add)

  • We managed a huge volume of data generated from different business units (onshore and offshore) whilst re-working existing step plans and sign-off procedures to increase efficiencies.
  • Trained internal staff and by leveraging off our expertise enabling them to deal with a variety of technical issues.
  • Create a secure web-based technology platform and an “eRoom” for the collection of data which was accessible to both Deloitte and the client.

Outcome

  • As a result of detailed planning, with robust work plans, and early engagement with established contacts in HMRC the initial phase of the project was completed ahead of schedule and within budget. Following its success the client has instructed us to eliminate a further 400 companies and to date more than £4b has been returned to shareholders.
  • Following the initial phase, the client instructed us to eliminate a further 400 companies and to date more than £4b has been returned to shareholders.

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Case study 2

A National UK High Street retailer identified a number of group entities that served no economic purpose and which they wished to eliminate. The client initially sought advice as to the most suitable method of dissolution – strike-off or solvent liquidation.

Key issues/considerations

  • The client had internal resource and the wished to undertake work themselves
  • The in-house team had no previous entity elimination experience
  • The Board wanted the project to be completed within 6 months

Our role (or value add)

  • We categorised the entities into potential strike-offs and liquidations - the directors chose to liquidate 16 companies, the remainder they struck-off
  • We held an initial workshop with the in-house team to explain the process and set out what was needed from them
  • We devised specific workbooks to gather relevant information for example, company secretarial, tax, pensions etc
  • We used web-based technology for the collection of data, accessible to the client and Deloitte and acted as project manager driving the project forward

Outcome

  • Following detailed planning and early communication with HMRC lengthy and costly delays were avoided as the project progressed
  • All 16 companies eliminated within 6 months
  • £20m returned to shareholders
  • The in-house team managed costs which were estimated by the client to be recovered within 12 months

Legal Entity Reduction - Simplifying a Global structure with Project Management support

Introduction and key benefits

Points to consider

Before embarking on a global entity reduction project these are some typical issues to consider.

Does your client have clarity why all of the group entities exist and do they have the resources to oversee and manage a global eliminations project?
Do they know their elimination options in each of the jurisdictions, the requirements and the most appropriate elimination method?
Do they know how to rationalise entity balance sheets and repatriate capital efficiently across jurisdictions prior to elimination?
Does your client know how to plan the collapse of a group structure that contains assets and to deal with intellectual property in an unwanted entity?

Our dedicated team of specialists have worked on numerous multi-jurisdictional projects across all sectors and can assist by acting as a single point of contact, consulting with the client and managing the delivery of the Deloitte Global Network across the various territories. If you would like to discuss your potential project then please contact Stephen Browne.

Credentials

Case study 1

This International Technology Company had made two significant acquisitions doubling the size of its legal entity footprint. Faced with a reduction in headcount it was necessary to tidy up the group structure to take cost out of the business.

Key issues/considerations

  • A complex multi-jurisdictional project which required detailed planning and significant tax and treasury analysis
  • Significant corporate memory loss requiring a commercial, solution driven approach

Our role (or value add)

  • Validation exercise was undertaken with the client that identified 200+ legal entities that could be eliminated (by either merger, liquidation or de-registration, as appropriate)
  • High level step plans prepared for the target companies and key issues to address were identified
  • Data rooms established for the management of a large volumes of information
  • To ensure momentum was maintained we updated the client’s steering group on a regular basis of progress against key milestones

Outcome

  • Client project team worked with Deloitte in more than 20 jurisdictions to deliver a series od solvent liquidations
  • The project is ongoing with the client team now preparing elimination targets using the embedded knowledge from the project

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Case study 2

This Global Financial Services Company had completed a significant transaction involving the disposal of its core business and assets to a competitor but it had retained a legacy legal structure in over 30 different jurisdictions.

Key issues/considerations

  • With the former management having left the business or transferred to the new owner, and with only limited transitional provisions, the client required advice on concluding its global affairs

Our role (or value add)

  • Utilising the Deloitte international network we mobilised a global team to provide relevant advice on the appropriate options for closing legal entities on a country by country basis
  • Planning was key to the assignment as we defined parameters within which local Deloitte offices could act whilst maintaining a structured methodology for reporting progress and tracking costs against budgetary expectations
  • In certain territories it was necessary for the liquidators to negotiate the exit of the companies from their contractual obligations as part of the elimination process

Outcome

  • All target entities were eliminated within a demanding timescale and within budget

Strategic Asset and Investment Realisation

Introduction

Be it an SPV, a JV or a group of investments, once the economic purpose has been achieved you need to ensure asset realisations and returns to shareholders are maximized. Would you need support in taking steps to wind-down structures or entities and advice on the questions below.

Points to consider

Before embarking on an Asset Realisation project these are some typical issues to consider.

How are assets maximised? Is there more value to be realised on an entity by entity asset basis rather than a share sale of the group?
How are investments exited in the most risk focused manner to avoid value leakage and future creditor exposure?
How are returns repatriated to shareholders in the most tax efficient manner?

Whether it be the divestment of a complete group, or individual companies within it, working alongside management and utilising our wider sector and service line specialists (e.g. Real Estate, Direct & Indirect Taxation teams) we can assist clients in undertaking an options analysis and in devising (and implementing) a strategic asset realisation plan to ensure asset values are maximized.

If you would like to discuss your potential project then please contact Stephen Browne.

Credential

Privately owned Retailer

Key issues/considerations

  • Wind-down of one of the oldest family-owned antique businesses in the world, established in 1869, driven by the dying wish of the current directors’ father for the business not to continue beyond five generations.
  • Oversight of stock valuation and realisation: dividends from sale proceeds of high-end jewellery and precious antiques by trading subsidiary received by holding company.
  • Distribution of surplus cash in liquidation estate to individual shareholders by way of a capital return on their investment.
  • Assistance provided in ensuring fair cost allocations between the trading subsidiary and a related company, sharing common resources.
  • Liaison with key stakeholders so as to maintain the esteemed business reputation and avoid any disruption to business as usual during the solvent liquidation process.

Our role (or value add)

  • Personal and personable service achieved through face-to-face meetings with company directors/key personnel and board meeting attendance.
  • Careful strategy planning to ensure smooth wind-down and most tax efficient outcome for holding and trading companies and individual shareholders.
  • Synergies achieved across service lines with holistic offering provided by RS and Tax Advisory Teams.

Outcome

  • Repatriation of £45m cash to shareholders during the course of the liquidation to date, with future distributions to be made as stock is sold by the trading subsidiary.
  • Assistance provided to executors of deceased shareholder’s probate estate re valuation of shares.
  • Valued by client as their trusted professional advisor on restructuring and private tax advisory matters.

Managed Exit - wind-down and closure

Introduction

At Deloitte, we have developed a comprehensive suite of solutions to help businesses evaluate their options when contemplating an exit strategy of an underperforming and/or non-core area of their business. A summary explanation of the solutions Fix, Sell or Close can be found via (Managed Exit).

If, having considered/exhausted other options (Fix or Sell) it is concluded greater value can be achieved through a Wind-Down and Closure our team can assist you.

Points to consider

Before embarking on a wind-down and closure project these are typically some of the issues a client should consider.

How is the decision going to be communicated?
What are the really critical issues?
How is your client going to manage the costs, risks and key milestones?

We’ve worked with clients in various sectors, from financial services to manufacturing, to help them develop and implement exit and closure plans. We are flexible on how we work with clients and are equally happy to project manage and support a full closure process or simply provide practical hints, tips and pointers to management if the work can be performed in-house. Fundamentally, it is about unwinding the balance sheet to get a position where only cash remains having managed the employee exit process, terminated or transferred contracts and closed out potential future liabilities.

If you would like to discuss your potential wind-down and closure project then please contact Stephen Browne.

Credential

Overseas owned Electricity and Utilities

Key issues/considerations

  • Following an unsuccessful sale process, our client needed assistance in exiting its nuclear energy operations in the U.K. through a solvent wind-down and closure process.
  • High profile exit which also required the contemporaneous unwinding and release of a Parent Company Guarantee (“PCG”). Due to prior stock market announcements and key year-end milestones, the exit needed to be performed in an accelerated time-frame.
  • Support provided to the client relating to closure cost estimations (plus tax efficient funding), detailed wind-down planning, negotiation for contract exit, stakeholder management and the implementation of an accelerated solvent liquidation process.

Our role (or value add)

  • Comprehensive planning to ensure contingent liabilities were proactively managed and exit penalties were minimised.
  • Collaborative Teaming. On-site RS Managed Exit team overseeing client team and 3rd party contractors. Acting as a key bridge between shareholder and local employee team.
  • Experienced Japanese liaison team utilising language skills where required.

Outcome

  • Successful strategy to return development site to its former state as part of a settlement agreement entered into with U.K. Government. Release of Japanese parent from onerous PCG.
  • All contracts successfully exited under favourable commercial terms and contingent liabilities closed out.
  • Repatriation of shareholder funds and completion of project within required timeframe.
  • Client valued our ability to proactively manage their reputation risk and to successfully exit in a cost-effective, risk focussed, timely manner.

Key contact

Stephen Browne

Stephen Browne

Partner

Stephen has over 30 years’ experience and leads the Deloitte National Corporate Simplification team. He has extensive general restructuring and insolvency experience advising clients how to simplify t... More