Corporate Streamlining – A savvy and effective way to reduce cost, risk and be more “deal ready”

Cleaning up a corporate structure is often put in the “too-hard” basket by business owners and CFOs.  McGrathNicol estimates that, even for the simplest group, it can cost between $2,500 and $8,000 per entity per year in compliance costs, with the costs even higher for listed groups where the corporate governance burden is greater.

Whilst this expenditure range may not sound like a lot in isolation, recurring costs associated with the preparation of financial statements, annual solvency resolutions, income tax returns, business activity statements and in some cases, audits, can quickly accumulate, particularly where there are a number of dormant or unnecessary entities. In addition, dormant or non-trading entities (particularly following merger or divestment activities) add unnecessary compliance and business risk.

A corporate streamlining exercise through the Members Voluntary Liquidation (MVL) regime can efficiently reduce cost and risk in a timely manner.  It also makes a corporate structure more “deal ready” ahead of any potential M&A activity.

What is the MVL regime?

A MVL is a formal process of winding up a solvent company, via disbursing assets to a company’s shareholders and ultimately deregistering the company with ASIC. A MVL is a “one-stop” elimination process for a company, with benefits that include:

  • the process is managed by and risk is shifted to a Liquidator so CFOs and Executives can continue to focus on running the business;
  • it draws out and resolves any creditor claims or contingent liabilities;
  • it can provide tax benefits via distributing profits, capital reserves and pre-CGT assets for the benefit of shareholders;
  • it gives Directors certainty that superfluous entities are deregistered with ASIC and their statutory duties, filing responsibilities and risk have come to an end;
  • it can generally be undertaken in a short period of time (i.e. 4-6 months);
  • books and records can be destroyed earlier than the statutory requirement; and
  • capital can be appropriately returned to shareholders.

Whilst a corporate streamlining exercise can also be undertaken via a scheme of arrangement or deregistration / dissolution, we consider that in most cases, the MVL regime provides better certainty of outcome, results in a more streamlined corporate structure with a reduced recurring cost base and eliminates risk for Directors and shareholders.

How can McGrathNicol help?

We work with clients and their advisors (tax and legal) in the corporate sector to complete corporate streamlining projects. We are truly independent, know how to identify off-balance sheet assets and liabilities that may pose a risk to a successful deregistration and deliver value to clients even if they are time or resource constrained.

For further information on how McGrathNicol can assist you with a corporate streamlining process, please contact a member of our team.

AUTHORED BY

Matthew Hutton

Matthew Hutton
Partner, Melbourne
T: +61 3 9278 1009
E: mhutton

Rob Kirman

Rob Kirman
Partner, Perth
T: +61 8 6363 7685
E: rkirman

Barry Kogan

Barry Kogan
Partner, Sydney
T: +61 2 9338 2632
E: bkogan