Future-proofing Clarity IT Services with a strategic two-company structure to cut risk

Background

Clarity IT Services began “in a London pub” back in 1995, when co-founders Greg Lomax and Danny Grimes decided they could deliver more personable IT support than their employers. Since then the firm has grown into a nationwide managed-service provider to pubs, restaurants, hotels and other leisure brands, drawing on three decades of sector experience.

Until recently the whole business traded through one limited company that:

• Owned all client contracts and held employees;
• Held every penny of working capital and other current assets;
• Distributed post-tax profits to the same shareholders and carried all historical and future trading risk.
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The challenge

Operating everything inside a single entity exposed retained cash to claims arising from service-level penalties, cyber incidents or contractual disputes. The directors also wanted greater flexibility over dividend planning and a cleaner platform for future investment or exit, without triggering immediate tax costs.
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Our solution: a share-for-share exchange

We implemented a simple two-company group by inserting a new holding company (“HoldCo”) above the trading company (“TradeCo”). The reorganisation was carried out as a share-for-share exchange.
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What the Directors Say

“Creating a holding company felt daunting, but their structure was seamless. Our cash is protected, and dividend planning is far easier. We can now focus on scaling hospitality roll-outs without losing sleep over legacy risk.”‍

Greg Lomax, CEO
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Benefits Delivered

• Cash ring-fenced from operational risk. Retained earnings now sit in HoldCo, insulated from claims against TradeCo.
• CGT deferral and BADR preservation. Shareholders keep their original base cost and qualifying period, so Business Asset Disposal Relief remains available on a future sale of HoldCo shares.
• No stamp-duty leakage. s75/ s77 relief meant the restructure incurred £0 stamp duty
• Dividend flexibility. HoldCo can manage dividend timing to suit individual shareholders’ personal allowances and marginal tax bands.
• Investor-ready structure. Separating trading risk from accumulated wealth creates a cleaner balance sheet and simplifies warranties in any future fund-raise or sale.

Key Takeaways for Owner-Managed Businesses

• ‍Separate risk from reward. A holding company can safeguard retained earnings while the subsidiary absorbs operational liabilities.‍
• Think early about exit. Group structures give acquirers clarity (and creditors less leverage) when assessing diligence risk.‍
• Keep it simple. Two entities can often achieve 90 % of the benefit of a more complex group, with modest ongoing admin.

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Want to understand how business structuring could work for you? Download our guide to get started, or get in touch and our team will be happy to help you work out your next steps.

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