Management Buyout - FinTax
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Management Buyout

About This Project

Clients worked for a multinational group of companies.   The multinational group was downsizing its operations in Ireland and made an offer to existing management to acquire one of its Irish subsidiary companies.

 

Clients had secured bank funding to complete the purchase but would have to use company funds to repay the bank loan.  The tax leakage on extracting funds from the company to repay the loan would make the cost of repaying the bank loan prohibitive.

 

Solution new company was set up to complete the purchase of the Irish subsidiary company.  Bank loan was secured in new holding company in compliance with company law.

 

Subsidiary company would pay the company a tax free dividend to repay the bank loan.  The appropriate elections would be made on the company tax return to avoid the close company surcharges.

 

Purchase of subsidiary company was completed on a tax neutral basis.  If the parent company subsequently sold the subsidiary then the “participation exemption” would be available so that the sale could be completed on a tax free basis.

 

New legislation introduced in the Finance Act 2017 may have an impact on structuring an MBO in this manner.