Debt cap: group accounts: groups merging and de-merging: de-merger examples
Example 3 - a worldwide group de-merging into two separate groups, one worldwide
Group G is a worldwide group and is de-merging its European and American operations so that the European Group will have a new ultimate parent. Its new ultimate parent will be Company H the European Holding Company. After the de-merger the European Group will be a worldwide group in its own right. Group G draws up its financial statements to 31 December 2014 but the de-merger takes place on 1 October 2014, after that date Group G’s accounts only include the American operations. Group G’s accounts straddle the date of the relevant event. Group G will be treated as it is had prepared financial statements from 1 January 2014 to 30 September 2014 and from 1 October to 31 December 2014. It will finalise its debt cap position as at 30 September but as it is no longer a worldwide group does not need to perform a debt cap computation for 1 October onwards. The new independent European group will prepare its accounts for the period from 1 October to its new year end - 30 September 2015.
Example 4 - a worldwide group de-merging into two non-worldwide groups
Group J is a worldwide group and is de-merging into two separate groups, neither of which will be a worldwide group. Group J draws up its accounts to 31 March 2015 and the de-merger takes place on 1 November 2014. Section 348A applies because Group J is a worldwide group party to a relevant event and as a result of that event the two new groups will have new ultimate parents.
Group J’s accounts to 31 March 2015 straddle the relevant event and so Group J should be treated as if it had produced two sets of financial statements for debt cap purposes. One set for the period form 1 April 2014 to 30 October 2014 and from 1 November 2014 to 31 March 2015. The first set finalises the last debt cap position of Group J, the second set gives the starting position for Group J after the de-merger. In fact after the de-merger none of the de-merged groups is a worldwide group so no group has to prepare a debt cap computation.