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ORBIS Legal Profession Corporation

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　It is therefore necessary to periodically review and reorganize group companies every few years. Reorganizing group companies is a serious issue, but when you are focused on daily operations, it is easy to get carried away and make mistakes. It is likely that this is something that is often overlooked.

　While there are a wide variety of methods, such as company splits, mergers, dissolutions, real estate transfers, and receivables transfers, the core of any restructuring is management strategy. It is important to communicate thoroughly with management, have them formulate a clear management strategy, and then carry out a reorganization that matches that strategy. In this case, lawyers will be involved in both the planning and implementation of the restructuring, to determine what legal methods are available, tax accountants will determine what taxes and public dues will be incurred and how much they will be paid, judicial scriveners will be involved in commercial registration, and real estate appraisers will determine the appropriate valuation of real estate.

　Legal procedures are often used to resolve the problem, but unless court involvement is absolutely necessary, the matter is usually resolved outside of court.

 

(1) Reorganizing Group Companies

　Many successful small and medium-sized business owners diversify their operations in various directions as their businesses become more successful. As a result of this diversification, cross-shareholdings, financial lending, and sales transactions within the corporate group can lead to the creation of receivables and payables (accounts receivable and accounts payable), as well as overlapping business activities, which can hinder asset management for group companies and make it difficult to measure management efficiency.

　It is therefore necessary to periodically review and reorganize group companies every few years. Reorganizing group companies is a serious issue, but when you are focused on daily operations, it is easy to get carried away and make mistakes. It is likely that this is something that is often overlooked.

　While there are a wide variety of methods, such as company splits, mergers, dissolutions, real estate transfers, and receivables transfers, the core of any restructuring is management strategy. It is important to communicate thoroughly with management, have them formulate a clear management strategy, and then carry out a reorganization that matches that strategy. In this case, lawyers will be involved in both the planning and implementation of the restructuring, to determine what legal methods are available, tax accountants will determine what taxes and public dues will be incurred and how much they will be paid, judicial scriveners will be involved in commercial registration, and real estate appraisers will determine the appropriate valuation of real estate.

(2) Business Succession

　Recently, M＆A transactions aimed at business succession have become popular. While the number of cases in which children inherited their companies, as in the past, is gradually decreasing, many owner-managers still want their children to take over the businesses they have worked so hard to build. Deciding which parts of the business to transfer to their children and which to employees or other third parties is a major issue for owner-managers.

　Such business succession issues are generally resolved using the methods described in (1) above. However, there is also the option of utilizing a legal system known as a trust, which allows the owner-manager to retain control of the company while creating a structure that allows the owner-manager to act as guardian, and then transferring the business to their children.

(3) Inheritance Planning

　Even if there are loss-making companies within a group, or if inter-group debts are effectively worth less than face value or even completely worthless, if the owner-manager unfortunately dies without restructuring the group, the assets are usually valued at face value rather than their actual value, resulting in a large inheritance tax.

　As a result, you may find it difficult to pay the inheritance tax, or in the worst case, you may be forced to abandon your business.

　To prepare for such situations, it is still wise to regularly restructure the individual companies that make up the group. The specific method for doing so is basically as described in (2) above.

　All of the above (1) through (3) are issues that we lawyers encounter in our everyday legal work. Unfortunately, by the time we encounter them, it’s too late and there’s nothing we can do. Better safe than sorry, so it’s wise to undergo regular medical checkups and receive treatment.

(4) Other

　It’s not uncommon for issues to remain hidden and hidden without being made public. Even if a company does not fall into the categories (1) or (3) above, when extraordinary obstacles arise in the management of the company, there will be issues that need to be resolved. In such cases, we work closely with the client to clarify the issues they are facing and work together to resolve them. This is the solution business.