Martin Jinks
Office Night Left Pane

Demerger as a pre-cursor to a sale

Objective

To sell a trading enterprise in the most tax-efficient manner but at the same time retain valuable property investment assets.

Background

A family company, which had traded successfully for many years and which also held various property investment assets, was approached to sell the trading business. The family was happy to sell the trading arm, but reluctant to dispose of the investment properties as they yielded a healthy rental income.

Solution

Working closely with the family’s accountants and putting into practice its wide knowledge and experience of similar transactions, the team implemented a demerger by way of a reduction of capital. The business was broken up so as to establish a new, independent trading company whilst retaining the property investments in the existing company. This allowed the family to continue to benefit from the rental income and left the way clear to sell the trading company. Being familiar with the original company structure, the team was then perfectly placed to take the family’s instructions on selling the trading company in the most tax-efficient way. Having that prior knowledge meant the due diligence process was much simplified, and the specialist team members were able to bring about a swift completion and achieve the original objective.