A reorganization typically involves the transfer of assets, which may be interests in another group company or the operations of another group company, from one group company to another. If a Hive Up is made several years after the acquisition, goodwill should be determined on the basis of the fair value of the net assets at the time of the acquisition of the subsidiary and not at the time of the Hive Up. However, all or part of the goodwill transferred from the investment to Hive Up must then be amortized to reflect the depreciation resulting from the date of the first acquisition until the time of the rise of the hive. This is to take into account the fact that part or all of the economic useful life has already expired. Therefore, the goodwill recognized at the time of the break of the hive is the amortized amount, the accumulated depreciation adjusting the reserves at the time of accumulation upwards (this is not an error of the previous period). This processing is carried out in parallel with the amortization of goodwill in the consolidated financial statements to the extent that it has been prepared. If the consideration is unpaid in the form of an intra-group loan, the transaction will be included in the scope of the SDLC Guidelines. Among other things, this guide dealt with whether an interest-free loan would be classified as a distribution by the subsidiary (the lender). A “distribution” for this purpose includes any description of the distribution of an entity`s assets to its members. The most common type of distribution is a cash dividend paid to shareholders, but the definition is very broad and covers many other transactions. Alternatively, a newly formed company may acquire the shares of the trading company (“oldco”), which enters a CVA for zero or low value, as the equity of the existing Oldco company is often worthless. A comprehensive plan will be developed for the simplification project, defining the main objectives and focusing mainly on the tax implications of the proposed steps.
The plan will typically divide each of the group companies that are to be part of the project, and this can range from simple dormant companies that can be eliminated without further additional work to large commercial companies that need to be retained. A more detailed plan is then created for the project, which includes detailed steps for each company before it is disposed of. It also contains the relevant legal documents that need to be prepared and executed for each step. The focus is on assessing the existence of company-specific problems that could have an impact on the proposed simplification project. Examples: As part of Phase 5 (business/asset transfer), it may be necessary to build up distributable reserves in the company transferring assets. The availability of distributable reserves then means that the transfer can take place at book value. In addition, directors must consider their obligations to the company and corporate value issues at all stages of the project. A phase of major acquisitions or the use of special purpose vehicles can lead to a group structure that is too complex for current requirements.
Alternatively, elements of a group`s transactions may be executed by a number of companies, and the group may want to streamline its structure so that the elements of each transaction are located within a company. A group may also be made up of companies in a number of countries, and a foreign parent company may want to simplify its UK structure. P will decide the way forward for S at this point, but assuming that S is no longer needed, the intercompany balance could be reduced by a dividend from S to P. Other alternatives could be a formal liquidation or a dividend, followed by a request to remove the company from the register. A capital reduction could be made under section 641 of the Companies Act 2006 in order to extract the value of the share capital and prevent assets from being returned to the crown under the bona vacantia rules in the event of cancellation of the company. The same principles discussed above regarding hives could be modified and applied to a “hive” when a company and its associated assets and liabilities are transferred between two subsidiaries within a group. Since Aveling Barford (Aveling Barford Ltd v. Perion Ltd  BCLC 626), there has been uncertainty as to whether an intra-group transfer of assets could be made by reference to the carrying amount of the asset and not to its market value.
The Aveling Barford case concluded that if a company does not make distributable profits and transfers an asset to a shareholder at a price below market value, the company has made an illegal distribution. The uncertainty has been resolved by the introduction of provisions in the Companies Act 2006 which provide that when an entity whose profits are available for distribution transfers a non-cash asset to a shareholder, the amount of the distribution resulting from the transfer of the non-cash asset is as follows: they may also have divisions, which normally relate to a division in which the business of the company being divided is transferred to a new company, the shares of which are issued to a class of shareholders of the company being divided. Other transactions (or transactions) are transferred to another company that issues shares to the remaining shareholders (of the originally spin-off company). In other words, you end up with the original transactions held separately, with each transaction being held by a company owned by some of the original shareholders of the spin-off company. This type of division can occur, for example, when the assets of a company have to be separated after a dispute between shareholders. If a group entity is participating or has previously participated in a defined benefit pension plan, the group entity may need to contact the pension trustees to explain the proposed group simplification project and the impact on the strength of the agreement with the employer. Although the description suggests otherwise, a capital contribution does not involve the issuance of new equity and the Companies Act 2006 does not apply to capital contributions. It follows that company law does not regulate the conditions under which the contribution is made. Company law also does not restrict how the company can use the capital contribution, reflecting the fact that the contribution is not part of the company`s paid-up share capital. The above help sheet answers the basic questions that arise from a hive and is not designed as a complete solution for all group reorganization exercises.
If, immediately before its dissolution, a company holds property and rights in which it has an economic interest, those assets and rights shall be considered bona vacantia. This means that assets/ownership pass to the crown when the corporation is dissolved. It is therefore important to identify the assets of a company (e.B real estate, bank accounts, contracts) for which a deletion request is proposed. If an asset stays in a company and moves to the crown, it can lead to significant problems for the group. The due diligence process (level 2) is therefore important. S`s Books Dr Inter Company Balance 20,000 Cr Net worth 20,000 An example of a case where a hive agreement can be used is when a company wants to resume trading from another company and does so by first acquiring the shares of the target company and then transferring the trading to itself through a hive agreement. The term “hive” is often used to describe a type of restructuring within a group of companies in which the net assets and activities of a subsidiary are transferred to the parent company. Following an acquisition, it may be necessary for the acquiring group to move the acquired assets within its group to ensure that they are in the most appropriate subsidiary. This may include, for example, the transfer of companies to other group companies or the transfer of the target group or the company to a holding company in the group, if it was not the acquirer. The aim may be to simplify the structure of the company (e.B. remove inactive companies from the group) to make them more attractive to a buyer, or generally a restructuring may be appropriate if the group (or a company) only wants to sell part of its business.
For example, if a business operates a number of businesses and only some need to be sold, those businesses could be “packaged” as a step forward in a separate subsidiary, which is then sold to the buyer. .