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Whither widgets?

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11 September 2012
Issue: 4370 / Categories: Forum & Feedback
A trading company is considering the formation of a parent company to hold all of its share capital. It will then transfer one of its two trading activities to a new subsidiary within the same group

My client is a trading company A Ltd which is now considering the following transaction. There are two divisions within A Ltd carrying on separate trades: one the sale and servicing of widgets and the other the importation and wholesale distribution of a branded line of widgets.

The company has distributable reserves of approximately £300 000 and the shares are owned by one UK individual.

It is proposed to form a new holding company to take over all the share capital in the existing trading company A Ltd.

It is then proposed to subsequently transfer out on inter-group loan account the wholesale distribution widget trade to a new trading subsidiary company B Ltd within the same group with a consideration being left on inter-group loan account of £150 000 this mainly being for trading stock profits from the importation business being low...

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