What are the key advantages of dissolving a subsidiary which isn’t performing?

If an SME has spent a period of time expanding successfully then there is the strong possibility the expansion has led to the creation of different strands to the business.


This could be as simple as a specialist sideline or an entire overseas branch of your business. Taking chances on such areas of expansion is the most effective way for a successful business to grow….but it doesn’t always go to plan.


Sometimes a separate arm of the business can become more of a burden than anything else if it begins to lose money regularly. When this happens, it is important to act quickly and dissolve the side project before it affects the wider business. We have looked at the key advantages to this swift approach?


Releasing key funds


One of the central advantages of dissolving a subsidiary which is failing to perform is that is releases funds which can be placed elsewhere. Any subsidiary, however moderate, will have fixed costs and outgoings that are par for the course. An SME will always be able to find a better use for extra funds, whether the money goes back into the company or is used to purchase extra stock.


Freeing up the time of managers/directors


It may have been the case that you have appointed a particularly talented manager/director to head up the new branch of the business. If you have been forced into dissolving this project after it has failed to function properly, you can then place this valued employee elsewhere.


Ensures that the wider business avoids running into trouble


If one particular strand, no matter how large or small, of a company is losing money there is always the danger that this could have a knock-on effect throughout the whole operation. Removing the dead wood swiftly and effectively could be the kind of decisive action needed to ensure that your business does not begin to struggle down the line.


Corporate insolvency specialists


A corporate insolvency specialist such as Moorfields can assist business leaders, financial directors and stakeholders. We can help them to deliver pro-active solutions for their business, as well as advice on how to adapt to the ever-changing economic landscape. This could be particularly useful given how uncertain the immediate future could be for companies across the UK in 2013.


If you would like to have a free no obligation chat with one of our advisers please call us on 0207 186 1143.

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