The organization of the company’s assets is essential for carrying out a M&A process in Brazil, considering that this factor directly affects the valuation, and in most cases, its daily operations.
The first step of this organization is to identify whether there is any confusion between assets belonging to the company and those belonging to its partners. This situation occurs mainly in the case of family businesses, where the company’s assets and the assets of the partners/family were historically constituted jointly, until the moment when their separation is necessary.
There are some ways to carry out this regularization, and a careful assessment of the movements that will be necessary is essential, as there are relevant tax implications in Brazil, and a poorly carried out movement can represent an absolutely unnecessary high tax cost.
It is necessary to identify, initially, how the assets will be allocated and whether this equity will revert directly to the partners as individuals, or eventually to asset holding companies. Having completed this step, we highlight the 3 main movements that can be made to reorganize assets in Brazil:
1) Partial spin-off of the company, with the withdrawal of the shareholders’ assets to a company to be formed for this purpose or another existing one;
2) Donation of goods, where the company donates, in a format to be evaluated, goods to its partners;
3) Purchase and Sale, whether based on the historical or appraised value of the property.
Another factor to assist in decision making is the analysis of the assets removed and their relevance within the company’s operation, in order to identify whether they will continue to be used in the operation, through the payment of rent to the partners.
It is concluded, therefore, that the assessment of the scenario involves many variables in Brazil, and a multi-area analysis is essential, thus avoiding unnecessary movements and the burden of estate planning.
