Legal Entity Reduction - case study

Background

A FTSE 100 company had completed a hostile take-over of a competitor and the acquired business was brought into its Group.

Problem

• Excessive surplus entities (in excess of 200) were adding no value but costing the client £5,500 per annum to maintain each dormant entity and £10,000 per annum to maintain each inactive live company.
• These companies were soaking up senior management time and wasting millions of pounds on recurring corporate governance issues.
• The ever-pressing need for cost reduction and corporate efficiency was of concern to the Group and hence they focused on group structure and excess dormant entities.
• In addition, there was the danger of loss of corporate memory with knowledgeable and experienced company staff being offered voluntary severance.

Solution

• Initially, we were engaged on a pilot project involving five entities and as a result of this successful pilot, our team moved on to help the client eliminate a further 195 entities. The pilot project concentrated on a small number of less complex dormant entities to help shape the project and enabled the client to leverage off our experience and we transferred our knowledge, thus reducing their costs.
• Entities continued to be eliminated in batches of 10 to help the client deal with any issues arising in an effective and timely way.
• 200 companies were removed from the register within the agreed timescale.

Outcome

• We eliminated annual compliance costs of approximately £1m and avoided wasted management time.
• Payback to the client was less than two years.
• We liquidated surplus companies to avoid duplication of activities.