I often come across medium and large private group corporate structures that are a dog’s breakfast. Many have grown without a master plan and are filled with substantial and dangerous pitfalls that expose them to a potential loss of equity, excessive taxation charges and succession and estate issues. Is your company at risk of such financial and commercial devastation? Read on to find out.
Having the right structures in place.
From a risk management point of view, I often see corporate structures where a disaffected commercial participant (customer, supplier, employee etc.) can gain access to a large sum of the group’s wealth via an insufficiently guarded family member or group entity. These same groups may have excellent WH&S procedures but remain wide open to attack and substantial loss.
This being said, a good structure does not just happen. It needs to be designed by someone who is an expert in all critical aspects of corporate structures. A corporate structure architect, if you like!
Balance and corporate structure.
The key issues that need to be balanced in a good corporate structure are:
- Capital gains
- Asset movement
- Risk management
- Growth and
- Sensibility (think master plan, each part makes sense)
But how do you know if you have a sensible and well functioning corporate structure that ticks all of the above boxes?
I’m betting that you have seen and even implemented these factors individually, but do they talk to one another? Are they fluid in procedure and consistently carried out? Many companies place these issues on the backburner because they’re pressed for time, and these seem like ‘future concerns.’
In 25 years of working on corporate structure, I have never seen one without holes. There are usually many and usually substantial. Not to mention, governing laws that continually move mean that structures constantly need to be updated and revised.
Are there holes in your corporate structure?
- Are your entities separated into Trading, Equity and Financing?
- Do your families finance entities (I am not talking about your 3rd party bank!) have loan agreements and mortgages over your trading entities and all individuals (yes, I mean non participating spouses also!)?
- Do you have PPSR registrations (if you don’t know what PPSR’s are, then it is a problem!)?
- Can you move funds around the group without incurring additional taxation costs?
- Do you control your wealth without owning it?
If you are a medium-to-large private group, and you’re nodding your head to more than a few of these questions, there is a very high possibility that you have holes in your corporate structure. There may be many, and they could be substantial and devastating. But they can be overcome!
Toohey Reid can assist you in identifying these holes. We can generate a master plan that will assess all possible risks, and put procedures in place to mitigate these. Your company is busy and pressed for time, but this shouldn’t mean that the many elements of your corporate structure are placed on the backburner. Getting in a professional business and financial adviser to take care of these concerns and mitigate risk for your company is a time efficient and safe move for its future.
Stephen Toohey is a respected chartered accountant and tax advisor with over 25 years’ experience in corporate structure architecture. Contact Toohey Reid today and employ Stephen’s unique business acumen to protect your company assets!
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