A restructuring typically involves both company law and tax law considerations and aspects. At CLEMENS, we are experts in both areas and can therefore offer competent and holistic advice on any type of restructuring across legal areas.
Restructuring companies requires deep and detailed knowledge of company law and tax law. At the same time, the model must take into account the wishes and considerations for the future structure of your company.
Choosing inappropriate solutions can have significant tax consequences, both for you as a business owner and for the business itself. In addition, the chosen business structure can have unintended negative consequences after the restructuring, for example, in the event of a later transfer to the next generation or an external sale.
With our in-depth knowledge and specialization in both tax law and company law, we can provide you with holistic and professional advice that meets your specific needs and any challenges you may face.
The restructuring process
A restructuring process can be carried out in several different ways and include different elements of transfers. The transactions can be carried out as both taxable and tax-free restructurings, including using the rules in the Merger Tax Act and with or without permission from the Danish Tax Agency.
The different elements that can be included in a restructuring process are:
- Share exchange
- Demerger
- Merger and amalgamation
- Contribution of assets
- Company transformation
At CLEMENS, our many years of practical experience with all the tax and corporate law requirements of the various restructuring tools means that we can ensure the correct planning and organization of the chosen model, creating peace of mind throughout the process. Subsequently, we handle the execution in accordance with the chosen plan in close cooperation with your accountant.
With us, you get expert advice every step of the way.
Contact us here to help you through the processIs restructuring relevant to your business?
A restructuring process is basically a change process that to a greater or lesser extent alters the legal framework of the company or the company's ownership structure.
The motives behind a restructuring can be many. The need may arise as a result of changing growth prospects, the need to delineate risk between different business lines or the merging of departments in order to simplify a group structure. In addition, it may be relevant to carry out restructuring in preparation for a generational change or divestment of activities.
Share exchanges, mergers, demergers, demergers, asset transfers and the conversion of sole proprietorships into limited liability companies are the usual forms of corporate reorganizations. You can read more about these types of restructuring at the bottom of this page.
We focus on minimizing the tax burden of restructuring
Any kind of restructuring basically involves a transfer element. For example, a simple merger where two companies are merged into one, so that one company (the transferring company) contributes its assets and liabilities to the other company (the continuing company) - thereby surrendering the assets and liabilities - and then ceases to exist without liquidation. In such a merger, the owners of the dissolving company surrender their shares in the transferring company in exchange for shares in the continuing company or a cash sale price (or a combination of both). If the owners of the capital shares in the transferring company are natural persons, this disposal of the capital shares will generally trigger taxation.
It is therefore important that the tax consequences of the restructuring are taken into account during planning. Depending on the circumstances, it may be most appropriate to carry out the restructuring as a tax-free restructuring - or as a taxable restructuring.
In this context, it should be kept in mind that choosing a tax-free restructuring is not necessarily the best solution. Depending on, for example, the context of a subsequent sale or the circumstances of the company and the ownership group, it may be more obvious or necessary to carry out the restructuring subject to tax.
In general, the difference between a tax-free and a taxable restructuring model is the timing of the taxation. In a taxable restructuring, the transaction will constitute a disposal of equity and/or assets and liabilities that may trigger taxation. In a tax-exempt restructuring, the point of taxation is postponed so that taxation does not occur until the later point in time when the capital shares or the relevant assets and liabilities are subsequently disposed of.
The choice between the taxable and tax-free restructuring model depends on a number of different factors. The disadvantages of choosing the wrong model can be quite extensive and it is therefore important when planning a restructuring to take all relevant factors into account.
Advice on corporate restructuring and transformation
Successful restructuring requires a deep understanding of the relevant legal framework. In practice, there are strict requirements for carrying out a tax-free restructuring, and even minor formal errors in case processing can have significant tax consequences.
In addition, the future expectations of the company are also important when choosing a restructuring model. If you are planning or implementing a restructuring of your company, it is therefore crucial to clarify the considerations that need to be taken into account and prioritized during the restructuring.
At CLEMENS, you get expert advice throughout the entire restructuring process - from the initial considerations to the execution of the transaction.
Feel free to contact us for a no-obligation discussion if you are considering a future change in your company structure or if you have current challenges with an already completed restructuring.
FAQ
A merger basically consists of two or more separate companies becoming a single legal entity.
For example, a merger can be carried out by one company (the transferring company) contributing all its assets and liabilities to another company (the continuing company), so that the transferring company ceases to exist and becomes part of the continuing company, which continues to operate after the merger.
However, a merger can also be carried out as a merger of two or more companies, so that all the participating companies contribute all their assets and liabilities into a new company and then each one ceases to exist. The new company - containing all the assets and liabilities of the participating companies - then continues as the only company.
Mergers can be used to combine activities in acquisitions and simplify group structures, among other things.
A demerger can consist of a separate branch of the company's activities being spun off into a new or existing company (border demerger) or a company's assets and liabilities being distributed between one or more new companies, whereby the original company ceases to exist (termination demerger).
For example, demergers can be used to prepare for generational change, divide the risk between different activities by spinning off into separate companies and dividing functions into separate companies for organizational reasons.
In a share swap, the shareholder of a company exchanges his or her shares in that company for shares in another company. A share exchange can be relevant, for example, where the owner of an operating company wants to establish a holding company.
An asset transfer restructuring means that a company contributes assets and liabilities that constitute a separate branch of its activities to a new or existing company in exchange for shares in the receiving company.
An injection of assets may thus be relevant when a restructuring involves the division of several departments and functions in connection with the establishment or expansion of a group structure.
In the context of corporate restructuring, a corporate transformation is the process by which a personally owned and operated business is transferred to a limited liability company.
A company transformation can be relevant, for example, if co-owners of the company are to be taken on who want a limited risk.
A holding structure in a legal context refers to a corporate structure where a holding company owns shares in one or more subsidiaries. The holding company typically has no or very limited activity beyond ownership of the shares in the subsidiaries and any investments of a more passive nature.
A corporate structure offers a number of benefits, including the ability to receive dividends from an operating company tax-free. The dividends are thereby separated from the risk associated with the activity of the operating company.