Members’ Voluntary Liquidation – restructuring a solvent company
Occasionally a successful solvent company may need to be restructured to allow for a change in direction or to release funds or assets from within the company. This can be achieved via a Members’ Voluntary Liquidation.
Any such restructuring will have tax implications and we’re always keen to make sure that our clients do take the appropriate tax advice.
As Insolvency Practitioners’ we can act as Liquidators for a company going through a Members’ Voluntary Liquidation.
However, we are always sure to point out that we are not tax advisors. Where required we can introduce you to one our tax partners or alternatively we would be delighted to work alongside your existing accountants and tax advisors.
Members’ Voluntary Liquidation (MVL)
A Members’ Voluntary Liquidation is a shareholder-controlled procedure, which affords a tax efficient method for distributing or restructuring the assets and/or trade of a company.
A Members’ Voluntary Liquidation distribution can be of liquidated assets, assets in specie or of shares in newly formed companies, which then hold the assets of the liquidated company.
A Members’ Voluntary Liquidation can only be undertaken by a Licensed Insolvency Practitioner.
Tax advice should always be taken when considering a Members’ Voluntary Liquidation
Section 110 Insolvency Act company reconstruction
In very general terms the use of Section 110 within a Members Voluntary Liquidation MVL allows for shares in a subsidiary company to be distributed to the original shareholders of a company that holds the shares of the subsidiary company. This can make more sense when considered in the light that the new subsidiary company or companies have been formed as part of the Solvent Restructuring so this route is often used to split the trade and assets of an original company into two new companies held by the original shareholders. Section 110 should be used in line with tax advice.
Extra-statutory concession C16
ESC C-16 is no longer in use.
This applied in generality when a company was being dissolved under S.652 of the Companies Act.
This is the point where we state once again that we are not tax advisers; Extra-Statutory Concession C16 was s an HMRC concession that with their approval will allow for a distribution to shareholders though classed as an income distribution to be treated for tax as a capital distribution for tax purposes.
Company dissolution – beware bona vacantia
The term “bona vacantia” literally means vacant goods and is the legal name for ownerless property, which by law passes to the crown.
In generality bona vacantia will apply to any assets left in a company once it has been dissolved. Where care must be taken is in relation to the level of share capital left in a company. Take a look at the website of the Treasury Solicitor and this will explain the £4,000 cut-off level.