Industry independent Duff & Phelps explains how CSS mitigates risk and reduces the financial burden on corporates.
Current and potential investors, finance providers, employees and other stakeholders will all value transparency and benefit from a corporate structure that is streamlined and easily explained. This is according to Eddie Bines, Director at Duff & Phelps, the global advisor that protects, restores and maximises value for clients.
Bines commented: “It’s not uncommon for an organisation to have hundreds of companies in its structure. Even when these companies no longer serve an obvious purpose, groups often retain them, leaving them “as-is” rather than toying with the status quo.”
“Keeping such entities can be costly, risky (for the corporate itself and directors personally) and can hamper the implementation of other strategic initiatives. Consequently, streamlining the corporate structure is not something to continually postpone but to tackle head-on in the near-term, either on its own or as a component of wider strategic transformation/reorganisation initiatives,” Bines added.
Considering recent accounting controversies and the review of the audit industry by the Competition and Markets Authority (CMA), large and mid-market corporates are increasingly seeking complete independence from their service providers. Duff & Phelps is therefore ideally placed to assist organisations in this regard with its CSS offering.
Duff & Phelps’ CSS service is an independent rationalisation process designed to promote good corporate governance as well as release capital, increase corporate efficiency and reduce the financial and administrative burden faced by many businesses.
Bines continued: “We estimate that the average dormant entity costs approximately £10,000 per annum in direct and indirect costs to maintain, while an active one can cost upward of £100,000 as a result of the costs associated with the tax compliance, audit and company secretarial burden as well as other time-consuming administrative tasks associated with accounting, compliance and regulatory reporting.”
“But it is not just about cost. Our rationalisation process is designed to streamline a business, reduce inherent risk in maintaining the current entity structure and improve its attractiveness to potential buyers and investment groups,” Bines said.
Duff & Phelps’ CSS service – applicable to all types of businesses, whether owner-managed, national or international – is designed to achieve simplicity in an accounting, legal and regulatory environment that is increasingly challenging to navigate, and is tailored to suit the long-term needs of the business’ requirements, using restructuring techniques to produce the optimal outcome. A highly collaborative approach, the CSS service involves a four-step process, working alongside management and other stakeholders to formulate an optimal group structure for the business before undertaking due diligence, resolving issues and ultimately eliminating entities.
Bines further added: “Duff & Phelps has worked alongside numerous clients on CSS initiatives, from mid-market to large corporates. A properly planned, resourced and independent CSS initiative can deliver a wide-range of sometimes-unexpected benefits for your organisation. The trick is then to ensure that those benefits are sustained through making CSS business as usual, thereby facilitating long-term entity management.”