Spin-Off / Child Company Formation

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soma

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A convoluted situation here.. but perhaps it will make sense to someone ;-)

* Existing company is called "BrandName LTD"
* We would like to start a spin-off/child company (not sure of the terminology here..) called e.g. "BrandName Services LTD" where (a) the company/brand-name is still used but (b) the directors of the original company are not shareholders of the new company, but merely shadow/non-exec directors.

So is the best way to go about this..

1) Just create a company as normal - we would presumably (?) then get a call from the C.R.O. asking if we had no objection to such a similarly-named company being formed? (or would it just be straight-out rejected?).

or 2) is there some formal process for the creation of a spin-off company.

Any input appreciated,
Thanks.

PS I appreciate that the normal way to proceed is the original company "trading as" the new name - but in this case we want a separate business (accounts, assets etc).
 
The terminology you are looking for is a subsidiary.

Who will own this new company?
 
RonanC said:
Who will own this new company?
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Thanks for the input.

The shareholders of the subsidiary will be people who are not shareholders of the parent company - they are and have been entirely seperate from that business.

The directors of the parent company would be shadow/non-exec directors with no shareholding in the subsidiary.
 
ok, a subsidiary is generally owned by a parent company, or the majority is owned by them with other smaller shareholders. What you are explaining is a totally new entity with different ownership and the two companies will have no connection at all.

You are saying that you would like create a spin off company, will you own this company? Have you any connection to the other existing company? Or are you simply hoping to take a share of their business?

Directors and Shareholders must be kept totaly seperate and never mix these up, in most cases the owners of a company (shareholders) will also be directors but this is not always the case.

I'm a bit confused
 
RonanC said:
You are saying that you would like create a spin off company, will you own this company? Have you any connection to the other existing company? Or are you simply hoping to take a share of their business?
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Thanks for that Ronan it's helped me think it through - as I said it's a convoluted situation (with convoluted reasoning!).

Instead - assuming the parent company is split 50/50 between two directors, and one of those directors (but not the other) will now take a 50% shareholding in the new subsidiary - how straight forward is it to form a subsidiary? I havent seen any of "company formations" type outfits advertising this as a service.
 
To be a true subsidiary, the parent must own more than half of the nomimal share capital or if the parent is a shareholder it must then control the make up of the board of directors.

Its not a common practice for the majority of companies and therefore company formation agents wouldn't advertise this as their core business is new start ups.

Have a read of the legislation in regards to subsidiaries here
 
Just start a new business called "BrandName Services LTD" with written permission to use the BrandName.
 
Towger said:
AFAIK the CRO don't care what it is called.
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The CRO will refuse a new company name if it is too similiar to another existing one without written permission known as a letter of no objection from that existing company.
 
RonanC said:
The CRO will refuse a new company name if it is too similiar to another existing one without written permission known as a letter of no objection from that existing company.
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This is the primary reason my question/approach is so convoluted.

* The 'parent' company above is actually called "BrandName Differentiator LTD" (By Differentiator I mean enough text to differentiate the company's name from another company that already exists).

* That company, "BrandName LTD" had to provide a letter of no objection when "BrandName Differentiator LTD" was created.

* I do not believe (99% sure) they would ever provide a 2nd letter of no objection (if it were required) for this spin-off company. The reason being that business has majorly soured for them and they are IMHO in a very defensive/entrenched mindset. So I dont want to go there.

The new spin-off company would be "BrandName Differentiator Services LTD" so my query is this - would a letter of no objection only be required from "BrandName Differentiator LTD" OR would the C.R.O. insist on getting a letter of objection from both existing companies?
 
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soma said:
The new spin-off company would be "BrandName Differentiator Services LTD" so my query is this - would a letter of no objection only be required from "BrandName Differentiator LTD" OR would the C.R.O. insist on getting a letter of objection from both existing companies?
Click to expand...

Why not try it and see. It's the easiest option.
 
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