Would you like to simplify your company group structure and eliminate a number of those dormant subsidiaries, which are no longer required?
Dealing with companies can be a simple process. Finance directors need to focus on core businesses and have a straight forward group structure. Disposing of your dormant companies can reduce administrative and audit costs and facilitate greater understanding among finance professionals.
Are any of your companies dormant?
Many groups of companies include some that are dormant. Formed or acquired as part of the natural business development of your group, these companies no longer have a useful role to play in the group’s activities. Quite often, however, dormant companies can hide outstanding issues that could cause problems in the future. Issues such as:
- intercompany debts;
- potential problems regarding previous assigned leases;
- pension scheme issues;
- potential tax problems; or
- possible contingent creditors.
Investigating and resolving these issues will involve a number of people in different parts of your group. It is likely to prove difficult, therefore, to gather people together from the necessary disciplines such as company secretarial, accounting, tax and property to sort out the outstanding issues. This task can end up being one that is put on the “back burner” as a result.
An added problem is that your group may lose the background knowledge to some of the issues through retirement or changes in personnel. The result is that you may find that you have had dormant companies on your books for a number of years, and you could be incurring costs in maintaining them for no real benefit.
There are many costs, hidden and apparent, associated with maintaining dormant companies, such as preparation of the annual returns and accounts as well as management time.
Should these companies be struck off?
You as directors can apply to have dormant companies struck off. To make such an application you need to be sure that you have investigated all the outstanding issues. This includes identifying and notifying both actual and potential creditors. Until this has been done assets representing the nominal value of the company’s share capital cannot lawfully be distributed.