ring fencing

ring fencing

Meaning

  • to create a separate legal entity through the way of off-shore accounting in order to protect some assets in a corporation
  • to protect something through a way that may not be considered fair by all

Example Sentences

  1. It was the ring fencing that protected this company from an almost certain doom.
  2. Most of the Chinese ring-fenced companies are now learning how to survive in the competing world.

Origin

The expression comes from a business term which allows companies to protect certain assets from taxes, creditors, etc. by creating a separate legal entity and entitling the assets to that entity from the corporation that previously owned it. This allows the company to not have to give the assets up in a tussle with creditors since legally the tittle would have been transferred. This is usually legal but there is an upper limit to how many assets can be protected in this manner. It is considered as an unfair shield for the assets by creditors. A company that is about to go bankrupt would usually take this measure so that all its assets are not given up and that the management can set up under a new banner. It is a desperate survival tactics at times to be saved from creditors and still be operating in the market by some companies.

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