Video game group restructure to attract venture capital

Recently, our client, a video game developer, sought our expertise to advise on a corporate restructuring. They were the founders of, and shareholders in, a Singapore-based parent company and wanted to reduce this company’s shareholding in their UK-based subsidiary. The goal was twofold: simplify the corporate structure to attract venture capital and increase the autonomy of the UK subsidiary by reducing the influence of the Singapore holding company.

Challenges

Under the current structure, the UK subsidiaries were constrained by provisions of the Singapore company’s shareholders’ agreement, which dictated how they were run. Our client aimed to decrease the Singapore company’s shareholding and empower the UK entities to self-govern, making them more appealing to potential investors.

The situation was made more complex by the ongoing voluntary liquidation of a Hong Kong based company in the group. Additionally, the parent company had a varied shareholding which included 10 shareholders with stakes ranging from 2.22% to 43.72%. This diversity in ownership added layers of intricacy to the restructuring process, requiring our team to align shareholder interests across multiple jurisdictions.

What did we do?

Gannons was tasked with achieving the dual outcome of a simplified corporate structure while increasing our client’s control over the UK subsidiaries. After a thorough analysis, we recommended a share transfer of the shares held by the founder and other shareholder in the Singapore parent company to the other existing shareholders in the Singapore parent company. This then set the stage for further restructuring.

Next, we implemented a subdivision of the single share held by the Singapore parent company in the UK company. By subdividing this share, we could distribute ownership more granularly, which offered the benefits of enhanced flexibility in share allocation.

Once the subdivision was complete, the UK company allotted and issued new shares to our clients, in proportions that matched their previous shareholdings in the Singapore parent company. This manoeuvre enabled our clients to become direct shareholders in the UK subsidiary, essentially without diluting their original ownership percentages.

Outcomes and reflections

This transaction highlighted our team’s collaborative approach and restructuring experience, as we coordinated with local counsel in Singapore to achieve our client’s commercial objectives.

As a result of our expertise, we were able to simplify the corporate structure and maintain our client's control. Our client was able to benefit from the significant increase in the appeal of having a UK parent company to venture capital and other investment firms, positioning them for future growth and investment.

Furthermore, the successful execution of this complex restructuring underscores our expertise in navigating cross-border legal challenges and delivering tailored solutions that align with our clients' strategic goals.