In my previous articles, privatization scheme, divestitures, carve-out, hive off were mentioned. Now, we touched on to another corporate re-structuring which is called Hiving-down.

So what is Hiving-down?

It is the transfer of a business from an insolvent company owning it to a new subsidiary which is specially form for the purpose.

By doing so, there are advantages derived from it:

• It puts the continued trade into a company that does not suffer the stigma of being insolvent,

• It separates the task of clearing up the old company’s affairs from the continuation of the business,

• It avoids product liability claims falling on the Receiver or Liquidator personally,

• The new company forms a convenient package for sale to a purchase of the business.

It’s important to note that by doing this corporate restructuring of hiving-down, there is no change in beneficial ownership as the old company who previously own the business is now having shareholding in the subsidiary.

The hiving-down basically involve the sale of the business, goodwill and essential trading assets from the insolvent company to the subsidiary. There must not be any transfer of any liability hence there might be some assets excluded in the sale because they might be carrying potential liabilities. Also, some business are not sold to the subsidiary because of the pending of special registration requirements which might delay the transfers.

This hiving-down is recorded in a legal document where the legal agreement will at least includes the following:

• Definitions
• Sale and purchase of the assets
• Purchase consideration
• Time completion of the Sale and Purchase of the assets
• Employees involved
• Apportionment, pre-completion book debts and receivables
• Outstanding contracts
• Third party items and rights
• Exclusions
• Further assurance

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