Founders tend to date an exit from completion. Advisers date it from the point at which a buyer becomes identifiable, because that is the point at which most of the useful structuring options close. Between those two dates there is often a year of activity in which the founder believes there is still time and in practice there is not.
The reason is not that restructuring becomes impossible. It is that a reorganisation carried out while a transaction is in contemplation is examined differently, by the buyer’s advisers, by the authorities in each jurisdiction concerned and eventually by whichever institution is asked to bank the proceeds. Steps that would have been unremarkable eighteen months earlier acquire a purpose they did not previously have, and a purpose is exactly what a reviewer is entitled to enquire into.
What can be settled while nothing is happening
The ownership of the operating company can be arranged so that it corresponds to the founder’s actual intentions about family, co-founders and long-term holding, rather than to whatever arrangement was convenient at incorporation. Where a holding company is appropriate, it can be established, capitalised and given a history of ordinary corporate activity. Where the family’s position calls for a foundation or a trust, it can be settled and its purpose documented at a point when no transaction is in view.
The founder’s own residence position can be established or confirmed. Records can be brought into a state where the register, the resolutions, the filings and the accounts agree with each other, which is the condition every subsequent reviewer will test and the one most often found wanting. None of this is dramatic work, and almost all of it is easier, cheaper and less examined when there is nothing on the table.
Every structuring step becomes harder to explain in proportion to how close it sits to the transaction it precedes.
What becomes materially harder
Once a buyer is identified, transfers of shares, changes of residence and the introduction of new holding entities all attract a question about motive. In several jurisdictions there are specific provisions directed at arrangements entered into in contemplation of a disposal; in others the same result is reached through general principles. The founder is then in the position of arguing about intention, which is a far weaker position than never having had to raise the subject.
There is also a practical constraint that has nothing to do with the authorities. Diligence is running, the buyer is reading the corporate record, and any restructuring undertaken during that period appears in the data room. Changes made under time pressure, documented in haste and explained after the fact are precisely the entries that generate warranty negotiations and retentions. The cost of late structuring is often paid in transaction terms rather than in tax.
Preparing for the proceeds, not only the sale
The transaction is a single event; what follows it is not. Proceeds require somewhere to be received, somewhere to be held and a purpose for being held there, and the institution that receives them will ask about all three. A founder whose banking arrangements were built around an operating business and who now presents as a private individual holding a substantial balance is, from the institution’s perspective, a new client with an unfamiliar profile, whatever the length of the prior relationship.
The documentation that explains the source of those funds is at its most complete in the months around the sale and degrades steadily thereafter. Assembling it while the transaction papers, the corporate history and the professional advisers are all still to hand is a materially different exercise from reconstructing it two years later for a bank in a jurisdiction that had no involvement in the sale. The work is the same; only the difficulty changes.
This note is general in application and does not constitute legal, tax or regulatory advice. It describes practice observed across institutions and should not be relied upon in relation to any particular transaction.