Five benefits of holding companies

Charlie Taylor

Published: June 10, 2022, 3:06 PM Updated: June 10, 2022, 3:16 p.m.Pernilla Frisk, business lawyer at Nordea Private Banking. Photo: iStock & Jörgen Hinder There are various reasons why it can be advantageous to start a holding company. Above all, you as a business owner can benefit greatly from it in your business structure. Nordea Private Banking’s business lawyer Pernilla Frisk lists five reasons why she usually recommends her corporate customers to start such companies.Read more about Nordea Private Banking’s offer here.Holding companies, or owner companies as they are also called, are a form of company that only owns shares in other companies or conducts asset management. It is therefore not driving. This is how Nordea Private Banking’s business lawyer Pernilla Frisk explains the most important benefits:

Preparedness for future ownership changes

A change of ownership can sometimes come suddenly. You may receive an unexpected bid for your company, a partner becomes ill or may die. Then it can be good to have prepared a flexible group structure in good time. Usually you have a holding company that in turn owns shares in one or more subsidiaries. However, if you have several branches of business, there may be reasons to have these separated in different companies. In this way, you can sell different branches of business separately.

2. Asset management is separated

Many companies have significant amounts that constitute excess liquidity. In some groups, there may be large values ​​in several different subsidiaries, which together become an even larger sum. If there are no plans to reinvest in the near future, you should instead invest the capital to get a return. My recommendation is to look at asset management as a separate line of business. Placing asset management in a holding company makes it easier, then you can clearly see how much this line of business generates.

3. The board does not need to be involved

It is not always appropriate for external board members or an external CEO to be directly involved in asset management. They may not have the right knowledge or they may have a different view than the owner in terms of risk level. By managing the asset management of a holding company, you can avoid conflicts around this.

4. The risks are reduced

All business involves risk-taking – a company can go bankrupt or suffer a lawsuit. By collecting excess liquidity from the operating companies in a holding company, you to some extent separate the legal liability between the different companies. This can mean a reduced risk in the event of unforeseen events, such as claims for damages. Many such cases lead to conciliation and there may then be a risk that the settlement amount will be higher if there is a lot of capital in the business company.

5. Dividends are facilitated

In order to make a dividend from your company to yourself as a physical owner, there must be unrestricted equity according to the latest approved balance sheet. If you have asset management in different subsidiaries, there may not be enough unrestricted equity to distribute the amount you want. In some cases, you may have to wait until the next AGM. By having the asset management in your own holding company, you create the conditions for being able to distribute more easily during the financial year.

To think of

A restructuring of a group or a company has both tax and civil law consequences. It is not uncommon for family law aspects to be forgotten when the company structure changes. It is therefore important to take the help of expertise if you plan to start new holding companies. Find out more about how Nordea Private Banking’s lawyers can help you when it comes to holding companies

NORDEA PRIVATE BANKING

We offer a complete solution for asset management through personal advice to individuals, companies, foundations and institutions. As a customer with us, you get access to a range of exclusive services – knowledgeable experts, a large network of specialists and insightful advice that is tailored to your specific needs. To get the maximum benefit from Private Banking, you need to have more than SEK 5 million in investable wealth. Note that the content of this article is intended as marketing material and general information. The content should not be construed as personal investment advice. If you need personal advice, we recommend that you contact your adviser in Private Banking. Investments involve risk. Historical returns are no guarantee of future returns, the value of the invested amount can go both up and down. Future equity returns depend, among other things, on market development and transaction costs. In fund investments or portfolio management, the return opportunities are affected by the manager’s skill, the fund’s or portfolio’s risk level and related costs. The article is produced by Brand Studio in collaboration with Nordea Private Banking and not an article by Dagens industri

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