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!
- Self-employed 156 7
- Allowable for Corporation Tax? 428 11
- Personal Service Company and Isle of Man 158 1
- Microsoft One Drive 505 18
- Online Back Up 51 1
- Has Microsoft taken a huge bite out of Apple 378 5
- Are there any auto-enrolment engagement letter templates? 964 19
- VAT commercial property TOGC 92 2
- Audacity 1,410 24
- minority interest discount 195 6
- Seeking advice: Need some help with Company Accounts 614 9
- Not a question but made my day 1,253 24
- Software Sales 133 2
- Seeking advice: Freehold Pub Lease 358 10
- Amending 13-14 sole trader return to reflect increased profit in 14-15 345 5
- vat gross margins 138 1
- Winning clients from retiring accountant - ethics/morals 1,612 13
- A rant - Debt Management units vs PAYE office response times 201 1
- How do I know if I have to apply a reverse charge mechanism 217 4
- On to a loser here? 1,207 4
- NHS finance professionals 606
- Auto Enrolment and Foreign employers 391
- Foreign Pension Contribution 367
- vat gross profit percentage margins 338
- Employee's statement of sickness (SC2) form - no longer available as downloadable pdf 333
- Pre Season Invoice dated September how do you treat the VAT as not due until May 16 311
- SWAT AML v Anti Money Laundering Compliance Plus (AMLCP) 276
- Quickbooks online filing of VAT 267
- Does pension term assurance count for unused relief purposes? 238
- IFA income recognition & reporting 202