Put simply, clarifying your corporate arrangements will free up time and save you money.
Overly complicated group structures and redundant entities that can accumulate over time erode profits through unnecessary costs each year.
A corporate simplification program is a careful review of your corporate structures to identify extraneous entities that can be removed and deregistered. The program focuses on simplifying your corporate structure by improving corporate governance and transparency, increasing tax efficiency, reducing director exposure and streamlining group structures.
Where an entity is no longer required, a member’s voluntary liquidation may be necessary, whereby a solvent entity is liquidated. Such liquidations are often undertaken where there is a tax advantage that can be realised. They are also relevant where an entity is seeking certainty that all assets and liabilities have been addressed, or if an entity does not meet ASIC’s deregistration requirements.
The benefits of a member’s voluntary liquidation include:
- Taxation benefits applicable to liquidators’ distributions of pre-capital gains tax reserves retain their tax exempt status.
- The ability to obtain taxation clearances from the appropriate taxation authorities.
- Reduced risk for directors and improved corporate governance
- A decreased likelihood of debt enforcement after deregistration due to the formal advertising process required during a member’s voluntary liquidation − any outstanding debts which might be claimed after deregistration cannot be enforced.
After completion of any liquidation the process to reinstate a company’s registration is more difficult and may require application being made to the court and cause shown as to why the company should be reinstated.
Although companies may be eligible to simply apply to ASIC to have their corporate registration cancelled, under the deregistration process there is not the same level of diligence undertaken nor comfort provided to directors compared to a member’s voluntary liquidation.
Further, if a deregistration process is followed, any creditor or the ATO can apply to ASIC to have the company reinstated, which is a reasonably simple procedure.
Consider whether your client has any dormant entities or entities that may benefit from a solvent member’s voluntary liquidation.
If you would like to discuss corporate simplification further and how it may benefit your clients, please contact your usual Affinity advisor or one of the Affinity State Leaders below.