Post-closing considerations
Integration and remedying due diligence findings
Regardless of where your target is situated, post-acquisition integration is a critical phase after closing and is important to get right to ensure a smooth transition and the realisation of anticipated synergies. It's also important to remedy any legal issued identified during due diligence – for example breaches of contract, IP concerns and compliance issues should be resolved which may require adjustments to corporate policies or the renegotiation of certain customer or supplier contracts.
While most considerations will apply across all jurisdictions, if the acquisition results in you having a UK or European subsidiary or branch, then you'll need to comply with local laws and regulations (including employment law, data protection (GDPR) and industry-specific regulations). If you are planning to export personal data from an acquired entity to the US following acquisition, bear in mind that you'll need to take steps which allow you to import the data.
This can be achieved by signing up to the EU-US Data Protection Framework/UK Data Bridge or by entering into EU/UK standard clauses. These options all have pros and cons, so it'll be important to take appropriate advice before the acquisition closes so that you can move data as quickly as possible afterwards. Whatever approach is adopted, it is imperative that you understand how and where data will be moving and what the associated risks to the target may be.
You should also consider what new stock option arrangements would be appropriate post-closing, including any sub plans and/or tax-favoured arrangements for employees and other individuals engaged in the UK and Europe. Any redundancies or relocations should be managed sensitively.
Financial reporting and accounting procedures will need to be unified to ensure consistency; this could involve reconciling differences between US GAAP and IFRS or UK GAAP. Similarly, tax strategies will need to be co-ordinated across jurisdictions to optimise tax positions while maintaining compliance with local tax laws.
If post-closing board changes will be effected, bear in mind that under new laws which are due to take effect in 2025, directors of all UK companies will need to have their identity verified by the UK company registry, Companies House (or a registered intermediary who confirms the ID verification to Companies House). This identity verification requirement will also extend to certain (direct or indirect) beneficial owners of UK companies, including those overseas. Pursuant to existing legislation, companies also need to file details of beneficial owners with significant control and so post-acquisition details of your ultimate owners may need to be filed at Companies House.
Our full-service offering means we're well placed to help you with your post-closing integration.
We support on data mapping exercises designed to identify the types of data being processed and the associated legal basis for doing so. Once data has been mapped, we can help you to ensure that proper transfer mechanisms are in place and all transparency and accountability requirements are met under UK and/or EU privacy laws.
Repatriation of profits
The most common means of extracting profits from a UK company are via dividends, interest payments on intra-group debt and royalty payments. Intra-group service fees may also be used.
The payment of dividends by a UK subsidiary to its US parent does not attract UK withholding tax under UK domestic law, although dividends are not tax-deductible and are paid out of post-tax profits.
The payment of UK source interest and royalties would ordinarily give rise to 20% withholding tax, although this should typically be eliminated under the UK-US double tax treaty. The underlying payments should, subject to anti-avoidance rules, be deductible for corporation tax purposes.
You should not suffer a UK tax charge on the ultimate disposal of the UK holding company since a non-resident seller is not generally liable to UK corporation tax on gains arising on a sale of shares in a UK company unless the company holds substantial UK real estate.
US buyers seeking to extract funds from a UK company should also be wary of, and take legal advice on, the any proposed transfer of funds upwards within the combined group, to ensure they do not fall foul of the relatively stringent distribution regime under English law.