Reducing share cap to create distributable reserves
My client is a Ltd Co with share cap of c£50k and share premium of c£300k. There are no distributable reserves as the P&L a/c shows a loss of £250k. The co is not trading any more but has cash of £80k and few creditors. It wants to pay a dividend so we are looking to reduce the share capital in order to create distributable reserves. I have done quite a lot of research but am having trouble confirming a few points. My proposal is:
1. Reduce share cap to £500 by cancelling shares. 99 out of every 100 shares would be cancelled so all shareholders retain the same percentage shareholding afterwards, but their share cap is reduced. A/c entries are dr share cap, cr P&L
2. Reduce share prem to nil. A/c entries are dr share prem, cr P&L.
End result is share cap of £500 and P&L of £99,500.
I know that we need to do a solvency statement, a special resolution, a directors' statement and a statement of capital to effect this. The thing that is concerning me is the cancellation of the shares. I have found lots of info about reducing share cap, but nothing specifically referring to the cancelling of shares. Can we reduce share cap by just cancelling some of the shares? And if so, are the a/c entries above correct or does the reduction in share cap have to be returned to the shareholders?
A further point is that we have lots of shareholders and as the company has been dormant for many years, we do not have up to date contact details for them all. I think we need 75% of them to agree to the resolution for it to go ahead, but what do we do if we cannot even get in touch with 75% of them?!
If anyone can help I would really appreciate it!
- The Cotter Case 170 2
- The complete uselessness of the British banking system 88 3
- HMRC Accounts Office - waiting an hour! 123 2
- Under Cash Accounting rules how do I account for a credit note issued outside the Corp Tax period? 18 1
- Fee agreed but client disagrees on amount 935 16
- Sole Trader business 149 1
- Transfer of sole trade to ltd co 149 1
- How will the taxation of non-residents landlord work? 143 1
- Giving a seminar 680 36
- Tax position on lease extension 174 1
- Boffin of the Year 294 10
- deleting customers on Sage 50 217 8
- Using Director's bank account to receive payment from customer 235 4
- Sage Depreciation 75 1
- Non sequitur 248 2
- Am i Liable? 874 21
- Sale of business being paid by deferred payments by buyer 169 1
- tax relief for the cost of trade marks 155 1
- Interest on main residence mortgage then lent to a company 72 1
- Has anyone been told of the extra Sage Payroll fees for auto enrolment? 475 10
- Desperately seeking Susan, Sam or anyone with any other name 1,293
- Experience with Islamic investor following Sharia-compliant rules? 639
- Darwinpay Partnership Assessment 422
- S464A Charge to tax: conferring benefit & BIK 331
- Quirky thread of the year: Community Awards 261
- Alphabet shares 219
- Agent fees to sell business 212
- ACCA continuity of practice arrangement needed 206
- Office recharges 169
- How to reclaim VAT for a non-EC UK visitor 148