A Guide to Corporate Re-organisations

Reasons for Corporate Re-organisations

There are a number of reasons why a company or company group would undertake a re-organisation, including:

  • For operational reasons such as to provide for separate business streams or assets to be operated or held in separate entities within a group structure;
  • In a family owned business, to provide for succession planning and the passing of the business or businesses to the next generation;
  • To re-organise the company in a way which facilitates the sale of all or part of the business in the future; and
  • To provide a structure which will facilitate employee share incentive schemes.

Types of Re-organisations

Corporate re-organisations often take the form of ‘share for share’ exchanges and ‘share for undertaking’ exchanges. These are quite common in Ireland as tax legislation provides for certain exemptions from CGT and Stamp Duty where specific conditions are met, which can facilitate these types of re-organisations in a tax efficient manner.

Share for Share Exchange

A share for share exchange involves the shareholders in a company transferring their shares to a new company in exchange for that new company issuing shares to the shareholders. This a commonly used tool in creating a group or holding company structure.

Share for Share Exchange Example:

Mr. and Mrs. Bloggs each own 50% of the shares in Company A and wish to create a group structure. Mr. and Mrs. Bloggs set up a new company, Company B, with the same 50-50 ownership. They then transfer their shares in Company A to Company B, in exchange for Company B issuing new shares to them. The result is that Company B is effectively inserted as a holding company between Mr. and Mrs. Bloggs and Company A.

Share for Undertaking Exchange

A share for undertaking exchange involves a company transferring a business to a new company in exchange for the new company issuing shares either (a) to the first mentioned company (a direct share for undertaking exchange) or (b) to the shareholders of the first mentioned company (a three party share for share exchange).

Direct Share for Undertaking Exchange Example:

Company A owns property and operates a trading business. In a direct share for undertaking exchange, Company A transfers the trade to Company B, a newly incorporated wholly owned subsidiary, in exchange for Company B issuing shares to Company A. The result is that Company A continues to hold the properties and Company B, its subsidiary, owns and operates the trading business.

Three Party Share for Undertaking Exchange Example:

Mr. and Mrs. Bloggs each own 50% of the shares in Company A, which operates both a retail and wholesale business. They set up a new company with the same shareholding. The wholesale business is transferred to Company B in exchange for Company B issuing shares to Mr. and Mrs. Bloggs. The result is that the business transferred is ‘hived out’ to a new company which has common ownership, but which is not a group company.

Common Pitfalls

Secured Assets

  • It is important to check at the outset whether any assets or undertakings proposed to be transferred as part of a re-organisation are subject to security granted to a financial institution. Where the finance facilities have been repaid, there may still be a charge in place which needs to be registered as satisfied. Where finance facilities are current, the security will need to be reviewed to check whether a release or partial release or bank consent is required.

Transferring Employees

  • Where a business is transferred as part of a re-organisation, the employees working in that business will transfer to the new company under the Transfer of Undertaking (Protection of Employees) Regulations (“TUPE”). TUPE applies to any transfer of a business, even within a group or between companies or common ownership, and includes an obligation to give employees at least 30 days notice before proceeding with the re-organisation.


  • It is important to consider how a proposed re-organisation will affect the occupation of premises used in its business.
  • For example, in the direct share for undertaking exchange example given above, at the outset, Company A owns and occupies the business premises. Following the re-organisation, Company A would own the premises and Company B, which operates the business, would occupy it. It would therefore be necessary to put an intragroup lease in place.
  • Another example would be where a business is to be transferred and its premises is occupied under a Lease. In that case, the consent of the landlord would be required to assign the Lease from Company A to Company B.

Material Contracts

  • Are key contracts with customers and/or suppliers assignable as part of a re-organisation or is it necessary to get the other party’s consent in order to transfer the contract to a new company?

Restrictions on Three Party Share for Undertaking Exchange

  • In the case of a three party share for undertaking exchange, it will be necessary to consider at an early stage whether the transferring company has sufficient profits available for distribution to facilitate the transaction and whether the Summary Approval Procedure is required to comply with Section 91 Companies Act 2014.

Connected Party Transactions

  • Where a re-organisation will involve a transaction between a company and its directors or other company controlled by its directors, consideration will need to be given as to whether any restrictions on connected party transactions under the Companies Act 2014 apply and, if so, what steps need to be taken to comply with these.

Tax Reliefs

  • As mentioned above, certain tax reliefs are available in respect of share for undertaking and share for share exchanges. It is important to ensure, in consultation with your tax advisors, that the necessary conditions are met and to consider any clawback provisions which might arise in the future.


There are numerous ways a corporate re-organisation can benefit a company, its business and its owners and reliefs and exemptions are available to enable these to be put into effect in a tax efficient manner. It is important to take tax advice and legal advice at an early stage so that a company is in the best position to implement the re-organisation in a smooth and timely manner.

How we can help

Please contact Eimear Grealy, in the Corporate Department of BHSM on 01 440 8300 or egrealy@bhsm.ie for further information.

This article is for general information purposes. Legal advice must be obtained for individual circumstances. Whilst every effort has been made to ensure the accuracy of this article, no liability is accepted by the author for any inaccuracies.


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