What makes a Clever Company? ...Planning a clever ownership structure to minimise risk.

Armstrong Downes

Case Study

Wellington construction company, Armstrong Downes has grown rapidly since Murray Armstrong and Fintan Downes set up business with four employees in 1992. Turnover doubled each year for the first five years and they now employ 40 key management and construction staff.

When a business is thriving it’s hard to imagine that a time might come when the worst case scenario is a possibility, but in a volatile industry like construction, clever companies make sure they are not exposed to the ups and downs of the market.That means structuring the company to separate ownership and liability as much as possible as Murray explains.

"This is a high-risk industry. When you’re tendering for jobs there’s virtually no margin for error. With good management those risks are reduced, but it makes sense to protect yourself from that sort of exposure. We’ve been given good advice in setting up what is a reasonably complex ownership structure, which not only provides that protection, but also takes tax issues into account, acknowledges our individual family needs, and paves the way for an exit from the business in the future." In 2004, we implemented the succession plan, which enables us to ease out of the business over the next few years through a sell down of shares to two key employees and also provide a smooth management transition and employment continuity for our staff.