Whilst the majority of the companies with which we work with are insolvent, recent changes in legislation has seen the number of solvent liquidations rise dramatically.

A company used to be able to apply to HM Revenue & Customs for a concession on surplus funds from a solvent company and distribute as capital receipts rather than dividends.

In March 2012 this concession was drafted into legislation and directors no longer need to apply for the concession as it is now automatic. However, the new legislation has capped these distributions at £25,000, which means that any distributions over this value will need to be made using a formal insolvency procedure. This is considered the most tax efficient procedure in these circumstances.

A Liquidator in a Members Voluntary Liquidation (MVL) also has the power to distribute assets in species. These are non-cash assets such as property or even book debts, for example.

This also permits for the use of a Section 110 scheme, which allows for the receiving of shares via a distribution in species, this procedure is most likely to occur when considering a demerger of the company into two or more separate entities.

Who Can Benefit From It?

A MVL may be appropriate in the following circumstances:

  • The company is solvent
  • The shareholders wish to retire and remove funds from the company
  • When a group of companies wish to restructure and / or reorganise the company structure

DCA Business Recovery can assist in placing the company into a Members Voluntary Liquidation, and distributions can be made to shareholders quickly and efficiently.

Please contact us if you need to discuss solvent liquidations in more detail or if you have a query which you need clarification on.