How to structure and MBO

Article Abstract:

A management buyout (MBO), where the management of a firm acquires the company, can be structured in three ways: a purchase of the shares of a firm; a purchase of the assets and trade of a firm; or a purchase of the shares of a newly-created subsidiary into which a firm's assets and trade have been hived-down. Management typically prefers to acquire the assets in order to access tax relief. In a share purchase, the buyer merely inherits the assets' tax written down values. A hive-down arrangement is a hybrid of the other two approaches that necessitates a sale of assets and subsequently a sale of the hive-down firm. A hive-down arrangement ensures the continuity of tax losses and capital allowances and provides protection from capital gains. A case study of a hive-down arrangement is presented.

Methods, Accounting and auditing, Management buyouts, Financial management

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Minimise the cost of incorporation

Article Abstract:

A sole trader's or partnership's transfer of a business to a company can entail a broad range of commercial and tax problems. Business incorporation triggers a cessation for income tax purposes. Sale traders and partners should transfer trading stock to the new company at book value to avoid incurring additional income tax in the final tax year. Other considerations discussed include: capital allowances for plant and machinery, industrial building allowances, losses, the value added tax, inheritance taxes, and retirement relief. Another important decision is the selection of an accounting reference date for the new company.

Economic aspects, Incorporation

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The way out

Article Abstract:

For owner-managed businesses, the buy-back of company shares helps to facilitate succession planning. The buy-back of shares, however, must involve careful planning in order to obtain the best tax options, and also because company law stipulates that the purchase price must be paid with distributable profits.

Planning, Stock redemption

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