Tax Partner, Russell Krupp, looks at four common areas where structural drift tends to emerge:
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Banking practices stop reflecting entity boundaries
Business receipts flow through the wrong accounts, entities pay each other’s expenses and funds become co-mingled. While these arrangements are often rationalised as administrative convenience, they can undermine the evidentiary integrity of the structure.
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Governance becomes procedural rather than deliberate
Trustee resolutions, board minutes and decision-making processes may continue, but increasingly document outcomes after the fact rather than genuine decisions made at the appropriate time.
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Related-party arrangements lose their connection to substance
Service fees, management charges, loans and distributions often continue year after year even when the underlying commercial rationale, documentation or payment flows have changed.
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Control shifts without the structure adapting
Founders step back, family dynamics evolve and advisers or key employees take on greater influence. Yet formal governance and control mechanisms frequently remain unchanged.
The common thread is that structures rarely fail because of a single mistake. They fail because assumptions made years earlier are never revisited as circumstances evolve.
The start of a new financial year is an ideal opportunity to conduct a structural health check. The objective is not necessarily to redesign what already exists, but to ensure the structure remains aligned with business reality.
Good structuring is not a point-in-time achievement. It is an ongoing discipline.
Get in touch to discuss whether your structure remains aligned with the way your business operates.
Further information / assistance regarding the issues raised in this article is available from the author, Russell Krupp, Partner, or your usual contact at Moray & Agnew.
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