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Corporate restructuring can be hugely beneficial for businesses with a number of important considerations under Irish law.
In Ireland, there are many types of corporate restructuring and reorganisation which may be undertaken at various stages of a company’s life cycle.
The corporate restructuring of a company may involve the transfer of shares, the reorganisation of share capital or the transfer of business or assets between companies. This may be achieved by transferring shares or business and assets, carrying out a share for share exchange or a share for undertaking exchange or it may involve a reduction in a company’s share capital.
Why Consider a Corporate Restructure?
The Companies Act 2014 (“2014 Act”) permits companies to restructure in various forms and there are several reasons why a company may wish to do so:
Enables companies to separate businesses or assets operating out of the same corporate entity
Facilitate the onward sale of a company or business or the refinancing of company debt
Solidify or capture value for shareholders at a particular point in time
Allow for business continuity and succession planning
As part of key employee incentive arrangements
Key Considerations
There are a number of important factors to be taken into account when considering a company reorganisation or restructure.
Tax Advice: It is essential to examine the tax consequences of any proposed reorganisation. This will ensure the most efficient and compliant structure is adopted.
Structure: Once the proposed structure is approved, a step plan of the stages of implementation should be prepared.
Company Law: The step plan will identify the key steps that must be undertaken by shareholders and the board to approve the transaction. The proposal will also have to be examined for company law compliance issues and whether the proposed activity is restricted under the Companies Act.
Employees: Will the proposed transaction affect employees and does the Transfer of Undertakings (Protection of Employment) Regulations (“TUPE”) apply to the process. If TUPE applies, specialist employment advice in relation to the consultation and notification process should be obtained and the necessary steps followed.
Consents: What consents are required to the transaction? An examination of contracts and arrangements should be undertaken with change control provisions in contracts identified and consent obtained. Bank facilities and loan arrangements will also need to be reviewed and consents obtained.
Operational: Where a business is transferring, operational aspects such as bank accounts and client relationship management will have to be carefully considered to ensure minimal disruption to the business.
Summary Approval Procedure
If the proposed transaction is restricted under the Companies Act then the provisions should be reviewed to identify if the summary approval procedure (“SAP”) is available to permit the activity.
Pursuant to the 2014 Act, certain transactions can first be approved by way of the SAP. This process allows for the validation of activities which would otherwise be deemed impermissible. Such activities include the provision of financial assistance for acquiring company shares, a reduction in issued share capital, the variation of share capital upon reorganisation and domestic mergers.
Stamp Duty Relief
There are some reliefs available under the Stamp Duty Consolidation Act 1999 (“SDCA”) for certain transactions between related entities.
Reliefs under section 79 (certain transfers between associated companies) and section 80 (in respect of certain schemes of reorganisation) may be available.
Conclusion
Businesses may decide to restructure for many reasons and a corporate restructuring can be greatly beneficial for a company.
Before undertaking a company restructure, it is important to take account of the financial implications, employee considerations and the operational impact on the business, while ensuring legal and corporate governance compliance.
Further Information
For advice on Corporate Restructuring or any related matters, please contact Gríana O’Kelly, Partner and Head of our Corporate & M&A and Commercial Contracts Team.