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  1. #1

    Default Establishing property holding companies

    I own several properties and all are held under the same Company name. What I'd like to do is establish several holding companies under the main company, so that each property is owned by its own individual limited liability company. And all of these companies would be wholly own by the existing main company.

    In terms of transferring the property from "main Company" to it's new "holding Company", can I simply transfer it? Or do I need to do a S&P Agreement between the Companies (even though the ultimate ownership remains the same).

    There aren't any mortgages over the properties, so no need to worry about notifying banks. I only need to consider LINZ and IRD.

  2. #2
    Join Date
    Feb 2011
    Posts
    166

    Default

    Can I ask what is the purpose of this?
    If you had 5 properties you'll have to set up 5 new companies (5x$160 = $800)
    You'll have 5 new sale and purchases from the lawyer - maybe discounted but still at least $4,000+
    You have depreciation recovered on all the properties when the are sold to the new entities... which could be a hell of a lot.

    Unless you have a super good reason for re-structuring there is no point as far as I can see.

  3. #3
    Join Date
    Dec 2010
    Location
    Cambridge, NZ
    Posts
    1,375

    Default

    In my opinion you can transfer with the transfer price set out in the resolutions authorising the "sales", which will all be major transactions for the subsidiaries. Legal ownership does change, so it needs to be recorded one way or the other, but resolutions would be fine.

    Another way to do it is for the holding company to subscribe for the subsidiary's shares in exchange for the property. That avoids any need to justify a transfer price because, being the subsidiary's only assets, the shares are self-evidently worth exactly what the property is worth.

  4. #4
    Join Date
    Dec 2010
    Location
    Cambridge, NZ
    Posts
    1,375

    Default

    Quote Originally Posted by sbw View Post
    Can I ask what is the purpose of this?
    If you had 5 properties you'll have to set up 5 new companies (5x$160 = $800)
    You'll have 5 new sale and purchases from the lawyer - maybe discounted but still at least $4,000+
    You have depreciation recovered on all the properties when the are sold to the new entities... which could be a hell of a lot.

    Unless you have a super good reason for re-structuring there is no point as far as I can see.
    Good points, although I suspect the legal fees will be less than that because of the lack of mortgages.

    Future damage limitation would be the most obvious reason, I would guess.

  5. #5
    Join Date
    Feb 2011
    Posts
    166

    Default

    Future damage limitation would be the most obvious reason, I would guess
    wouldn't you already have this having it structured in a company in the first place?

    I'm just not a fan of complicated structures when nines times out of ten they aren't necessary.

  6. #6
    Join Date
    Dec 2010
    Location
    Cambridge, NZ
    Posts
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    Default

    Well, Greenman will be the one that knows, but if you wanted to use one property as security then you don't have the company giving a general security that covers all the properties when only one would do, as an example.....not that I generally disagree with what you are saying about over-complicated structures.

  7. #7

    Default Thanks

    Thanks very much for your thoughts. Especially Ivan. The idea of the holding company subscribing for the subsidiary's shares in exchange for the property is simple and brilliant!

    SBW - there's a very good reason for this structure. A few thousand dollars outlay now means many easy nights sleep in the future for me...

  8. #8

    Default

    Ivan - I was checking your company website. You may want to update this page:
    calaw.co.nz/services-trusts

    This information is now out of date:
    Gifting programmes
    The actual transfer of wealth into the trusts is effected by way of an annual gifting programme. It is also common for the annual gifting programme to fall behind in time. We place emphasis on this aspect and use computerised systems to ensure our clients' gifting programmes are kept up to date.

    Our specialists in this area are Janet Jarman and Maureen Burton

  9. #9
    Join Date
    Feb 2011
    Posts
    166

    Default

    Just checking... I know it probably came across as negative... but "some people" go into extremely complicated structures for no reason... being an accountant I see it all the time, and certainly increases compliance costs and the like ect. Sleepless nights are not fun! :P

  10. #10
    Join Date
    Dec 2010
    Location
    Cambridge, NZ
    Posts
    1,375

    Default

    Thanks Greenman....actually the whole website is out of date....it's about to be completely replaced, including that section.

    One of the major problems was that the website developer did not make any client management software available, and wanted to charge what we felt were unreasonable fees for making even the most miniscule changes.

    Regarding gift duty, you might be surprised by the number of people maintaining a regular $27k per year. A major reason is the rest home subsidy...despite the fact you can now gift much more in a year, there is no limit whatsoever to the time the authorities can look back and assess gifts over $27k/year as depriving yourself of assets...with consequent penalties.


 

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