More than 40 per cent of subsidiary companies in the region are dormant it has been revealed and costing West Midlands business £88m each year.
Analysis of the legal company structures of West Midlands businesses by Deloitte shows 8,824 of the 20,339 subsidiary companies registered in the region are dormant.
With an estimated cost of up to £10,000 per year in unnecessary administrative costs and management time these surplus entities could be costing businesses in the region of £88 million per year, according to Deloitte.
Dominic Wong, partner leading the restructuring team at Deloitte, Birmingham, said: “The figures from the analysis indicate a missed opportunity. Whist there is inevitably some cost associated with groups eliminating their unwanted subsidiaries using appropriate procedures the payback period associated with this ‘one off cost’ is very attractive”.
“Most business leaders do not realise how much it costs to keep an oversized legal structure running, with only the statutory filing costs often being considered.
“This is not surprising, as most accounting systems set up by management do not provide information on the cost of maintaining a group’s legal structure.
“However, cost is only one of the issues. The regulatory burden of having unnecessary companies increases risk and diverts management time, in addition to which having an operating structure that is aligned to a legal structure will also help to drive business efficiency.
“Streamlining operations can often be put into the ‘not urgent’ or ‘too difficult’ pile. As a result, many businesses miss the opportunity to simplify the legal structure of their group.”