Hive Up and Hive Down Asset Transfers
Hive Up and Hive Down Asset Transfers
Expert Legal Support for Complex Business Restructuring
We help UK businesses and corporate groups, navigate the intricate legal and tax considerations involved in hive up and hive down asset transfers. Whether you are preparing for a business sale, restructuring your corporate group, or protecting valuable assets from risk, our specialist team ensures your transaction is efficient, compliant, and commercially sound.
This page explains what hive ups and hive downs are, when they’re used, the steps involved, the benefits and risks, and how we can support you throughout the process.
What Are Hive Up and Hive Down Transfers?
Hive up and hive down refer to corporate restructuring techniques that move assets, liabilities, and business operations between companies in the same group. These transactions are crucial for reorganising business ownership, improving tax efficiency, and isolating risks.
- Hive Up: The transfer of assets and liabilities from a subsidiary to its parent company. This may simplify the corporate structure and improve the parent’s balance sheet.
- Hive Down: The transfer of all or part of a parent company’s business to a newly formed (or existing) subsidiary. This is more common in practice and often used in preparation for the sale of a specific business unit.
Both processes require careful legal and tax planning to ensure compliance with UK company, tax, and employment law, and to avoid unintended liabilities.
When Are Hive Transfers Appropriate?
Hive transfers are typically carried out in the following scenarios:
- Preparing for a Sale: Hiving down a business unit into a subsidiary allows for a clean sale, isolating the desired business from the rest of the group and protecting the parent company from ongoing liabilities.
- Simplifying Group Structure: Hiving up subsidiaries into the parent company can streamline operations, reduce administrative costs, and facilitate better tax planning.
- Ring-Fencing Risk: Moving high-risk or high-value assets into separate entities can protect them from the operational risks of other group companies.
- Succession Planning: Family-run businesses may use hive downs to divide parts of the business into separate entities for different family members while maintaining overall ownership.
- Attracting Investment: Creating a distinct subsidiary with its own balance sheet can make it easier to secure financing or attract investors interested only in a specific business line.
If you are unsure which approach suits your objectives, our team can advise on the optimal structure for your situation.
How Hive Ups and Hive Downs Work: The Process
We guide clients through each stage of a hive up or hive down transaction. The process typically involves:
- Preliminary Planning
- Identify which assets, business units, employees, and contracts will transfer and which will stay.
- Assess the tax and legal implications for all parties.
- Review contracts, leases, financing agreements, and employee arrangements to determine whether third-party consents are required.
- Establishing the Target Entity
- For a hive down, a new subsidiary company is incorporated.
- For a hive up, no new company is needed, but corporate consents and proper valuation are critical.
- Drafting and Executing Transfer Agreements
- We prepare and negotiate the necessary legal documents, including:
- Asset or business transfer agreements
- Resolutions and board approvals
- Employee consultation and TUPE compliance notices
- Assignments of intellectual property and leases
- Tax Compliance and Structuring
- We advise on VAT, SDLT, and other tax issues.
- We liaise with tax advisors (including our own corporate tax solicitor) to ensure optimal use of reliefs and exemptions, such as the Substantial Shareholding Exemption for share sales following a hive down.
- Post-Transfer Notifications and Adjustments
- Notify HMRC, regulators, banks, landlords, insurers, and other stakeholders.
- Ensure smooth operational continuity, including any transitional service agreements if needed.
Benefits of Hive Transfers
Hive ups and hive downs offer a number of commercial and tax advantages:
For Hive Downs
- Clear separation of the business for sale, making it easier for the buyer to conduct due diligence and reducing transaction risks.
- Allows sellers to retain liabilities or unwanted assets while selling only the desired business.
- May preserve trading losses and other tax benefits that would otherwise be lost.
For Hive Ups
- Reduces administrative burden by eliminating unnecessary subsidiaries.
- Improves the parent company’s balance sheet, potentially increasing borrowing capacity.
- Simplifies tax compliance and enables better use of group reliefs.
These benefits, however, are only realised if the transaction is carefully planned and executed to avoid pitfalls.
Risks and Complications to Avoid
Hive transfers are legally and commercially complex, and several risks must be managed:
- Tax Traps: Failing to meet ownership or tax conditions can result in unintended tax liabilities, lost reliefs, or de-grouping charges.
- Employee and TUPE Issues: Employees have rights during transfers, and failure to consult or comply with regulations can lead to claims.
- Contractual Restrictions: Some contracts and leases prohibit assignment without consent, which may delay or complicate the transfer.
- Stamp Duty and SDLT: Transfers of property or shares may incur significant tax charges if group reliefs are not properly applied.
Our team anticipates and resolves these issues to minimise your exposure.
Case Study Examples
Example 1: Preparing a Retail Division for Sale
A client in the retail sector owns several stores under one company. A buyer is interested only in the online retail business. We help the client hive down the online division into a new subsidiary, transfer the relevant contracts, employees, and intellectual property, and sell the subsidiary to the buyer, ensuring the parent retained liabilities from the physical stores.
Example 2: Family Business Succession
A family manufacturing business can use a hive down to separate its two product lines into two subsidiaries. Each child receives one subsidiary to run independently while the parent company retains overall control. This enables smooth succession planning without disrupting operations.
Example 3: Simplifying a Group Structure
A corporate group with a web of dormant subsidiaries can hive up their valuable assets into the parent and dissolve the empty subsidiaries. This reduced administration costs and simplified governance, frees management to focus on growth.
Additional Considerations
Intellectual Property
When transferring intellectual property (IP), it’s essential to ensure proper assignments are executed and any registered rights updated with the appropriate authorities. Failing to transfer IP correctly can leave valuable assets unprotected.
Pensions and Employee Benefits
Employee pension rights can complicate a transfer, particularly if a defined benefit scheme is involved. We ensure pension trustees are consulted and that liabilities are properly managed, avoiding unexpected costs.
Lender Consents
Existing borrowing agreements often include covenants that may restrict or prohibit the transfer of assets or businesses. We review financing documents and liaise with lenders to secure the necessary consents.
Impact on Credit Ratings
A newly formed subsidiary may not have an established credit history, which could limit its access to finance in the short term. We help you plan for these challenges by structuring guarantees or transitional support agreements.
Why Choose Jonathan Lea Network?
At Jonathan Lea Network, we combine legal expertise with a deep understanding of commercial realities. Our service stands out because:
- Specialist Knowledge: We have extensive experience advising on complex group restructurings and pre-sale preparations for SMEs and corporates alike.
- Practical Advice: We focus on solutions that meet your business objectives, not just theoretical legal options.
- Tax-Savvy Approach: Working closely with accountants and our own tax advisors, we structure transactions to maximise reliefs and minimise risks.
- Responsive Service: We understand that time is often of the essence in these transactions, and we act quickly and efficiently.
With our support, you can restructure your business with confidence, knowing all legal, commercial, and tax implications are fully considered.
Client Concerns We Frequently Address
We understand that clients contemplating a hive transfer often have pressing concerns. Some common questions and goals include:
- “Will this expose my other companies to risk?”
- “How can I minimise the tax payable when selling part of my business?”
- “Will employees object to the transfer? How do we handle that?”
- “What happens to my existing contracts and customer relationships?”
- “How long does this process take, and will it disrupt operations?”
We take the time to understand your priorities and provide clear, actionable answers, keeping your business running smoothly throughout.
Take the Next Step
If you are planning a sale, reorganising your group, or simply exploring your options, don’t let uncertainty hold you back. Contact the Jonathan Lea Network today for an initial consultation. Our team will help you assess the most effective structure for your business goals and handle the legal and commercial details so you can focus on what matters most.
Call us on +44 (0)1444 708 640 or email to discuss your needs with one of our expert corporate solicitors.
Hive Up and Hive Down Asset Transfer FAQs
-
What’s the difference between a hive down and selling assets directly?
-
In a direct asset sale, you transfer specific assets and liabilities to a buyer, which can be complex and tax-inefficient. A hive down allows you to package those assets into a new company and sell the shares in that company, often making the process cleaner and potentially more tax-efficient.
-
Is a hive transfer only relevant for large companies?
-
Not at all. SMEs often use hive downs to prepare for the sale of one business division or to bring in investment, while keeping control over the rest of their operations.
-
What are your Legal Fees for Hive Up and Hive Down Transactions?
-
The legal fees for advising on hive up and hive down transactions vary based on the complexity, size, and timescales involved. At Jonathan Lea Network, we offer flexible pricing structures to suit different needs and budgets, ensuring clarity from the start. For simpler SME restructures, our fees typically range from £3,500 to £10,000 + VAT and disbursements, depending on the scope and documentation required.
-
How long does a hive down or hive up usually take?
-
The timescale depends on the complexity of your business, the need for third-party consents, and tax planning. A straightforward transaction can be completed in a matter of weeks, though more involved cases may take longer.
-
Do I need to involve accountants and tax advisers?
-
Yes, these transactions have significant tax implications. We work closely with your accountants and tax advisers (while also having our own tax solicitors if needed) to make sure the transaction is structured in a way that meets your objectives and complies with HMRC requirements.
-
Can employees refuse to transfer during a hive down?
-
Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), employees’ contracts generally transfer automatically. However, they can object to the transfer, which is why proper consultation and communication are crucial.
-
Will my intellectual property be at risk during a transfer?
-
If handled properly, no. Our team ensures that all IP is correctly assigned and registered in the name of the new entity, maintaining full legal protection.
-
Do lenders need to approve a hive transfer?
-
Often, yes. Loan agreements may include covenants requiring lender consent before transferring substantial assets. We can help you secure these consents to avoid breaching financing terms.
-
What happens to pension schemes in a hive down?
-
Pension rights and liabilities can transfer with the employees under TUPE or remain with the parent company, depending on the structure. We work with pension trustees and advisors to ensure obligations are properly managed.
Our Corporate Reorganisations Team
What Our Clients Say
Request a Free
No Obligation
20 Minute Call
This introductory call is to discuss your matter so we can provide a well-considered quote.
However, please be aware that the free 20 minute call is at our discretion. If you are more looking for advice and guidance on an initial call, we may instead offer a one-hour fixed fee appointment instead.
Our fixed fee appointments are between £200 – £300 + 20% VAT (£240 – £360 inclusive of VAT) depending on the seniority of the solicitor taking the call.