Asset protection

[newguy007]

I am in the process of setting up a holding company and transferring the asset (cash) from my main trading limited company. I have been going back and forth with my accountant regarding protection of assets in the holding company if the main trading company runs into financial difficulty.

I believe it shouldn't affect the holding company since this company simply holding retained profit from the trading company. It's a separate entity and there is no outstanding debt in the trading company when the funds are being transferred. Am I right to think that?

 

[Scalloway]

this company simply holding retained profit from the trading company.

How was the transfer effected? Did the trading company pay a dividend?

 

[newguy007]

How was the transfer effected? Did the trading company pay a dividend?

It hasn't been transferred yet but it will be processed as a dividend. The holding company will have shares in the trading company. I was told this would be the best option.

 

[UK Contractor Accountant]

What are you going to do with the cash in Holding Company (HC)?

Your plan achieves asset protection but if investment activities are considered there are ways of getting the cash out of the group without tax consequences.

 

[newguy007]

What are you going to do with the cash in Holding Company (HC)?

Your plan achieves asset protection but if investment activities are considered there are ways of getting the cash out of the group without tax consequences.

I am planning to invest and start another business. I have no plans to close my main trading company. My main goal is to protect the asset.

I don't think its possible to extract the cash out without paying a higher tax.

 

[Lisa Thomas]

What about putting a debenture in place before the funds are advanced, then the lending Co. will have some security.

 

[Chris Ashdown]

Will this not weaken the credit worthyness of the trading company and add to your accountancy bill

 

[newguy007]

What about putting a debenture in place before the funds are advanced, then the lending Co. will have some security.

There is no need for that since I have enough buffer.

Will this not weaken the credit worthyness of the trading company and add to your accountancy bill

The trading company doesn't need any credit but my accountancy cost will increase by at least £500 per year but I don't mind this if I can protect the asset.

My main goal is to protect the asset and invest it in other areas where I will get a better return.

 

[Lisa Thomas]

There is no need for that since I have enough buffer.

If the transfer is by way of a loan then you have a duty on behalf of the main Trading Co to protect the loan in case anything happens to the Holding Co.

 

[newguy007]

It's not going to be a loan.

 

[Lisa Thomas]

Okay thanks for clarifying.