Overview
A company growing beyond its original activity needs to review its organizational structure, since it may be better to create a separate subsidiary for a new activity rather than folding it into the existing entity, particularly if the new activity carries different risks.
Business structuring also accounts for the tax and zakat side of each option, since tax treatment differs by chosen structure, something we review in coordination with the company's accountants.
Regulatory Basis
Business structuring falls under the Companies Law regarding the relationship between different entities, and determining which one carries legal responsibility for a specific activity.
Where structuring spans entities in more than one city or an activity requiring an additional sector license, we review these requirements as part of the overall structuring.
How Structuring Proceeds
Review begins by understanding the company's current structure and the goals of planned expansion or change before recommending any new structure.
From there, we set out specific options with the regulatory and tax implications of each explained, so the client decides with full information before implementation.
Who Needs This Service
A company expanding into a new activity that needs to assess whether it's better to fold it into the existing entity or create a separate subsidiary.
A group of companies needing to reorganize the relationship between its different entities to clarify legal and financial responsibility between them.
We also track the impact of any restructuring on existing contracts with suppliers and customers, since some contracts include a clause granting the other party the right to renegotiate or even terminate when a material change occurs in the contracting company's structure, a detail worth reviewing before implementing any new structure rather than after.
Additional Considerations
Restructuring often connects with a parallel review of corporate governance, particularly when the restructuring creates new subsidiaries needing their own boards or authorities.
When the new structure involves transferring real estate assets between entities, this connects with our real estate and property law service to confirm the validity of ownership transfer procedures.
Common Questions
When is creating a separate subsidiary the better option?
Often when the new activity carries risks materially different from the original activity, or when the company wants to isolate legal liability between the two activities.
Do you review tax implications when recommending a structure?
Yes, in coordination with the company's accountants, since each structure carries different tax and zakat treatment worth reviewing before deciding.