The mechanics of extracting capital and winding up a business were thrown into confusion during the past month after the Treasury Solicitor initially put aside the long standing concession under which it would not recover capital of less than £4,000 from struck off companies, and then changed its mind.
The fun started in October when the Treasury Solicitor announced it would withdraw the bona vacantia concession from 14 October 2011.
When a company is struck off under HMRC’s Extra Statutory Concession ESC C16, its assets are classed as being without a legal owner and so belong to the Crown under the doctrine of bona vacantia. Under CA 2006 s 829(2) distributing these assets is illegal, but due to the impracticalities involved, the Treasury Solicitor historically did not go after amounts under £4,000.
Very quickly the Net was buzzing with people considering the implications of the change. As Paul Scholes and Nichola Ross Martin explained on AccountingWEB, the prevailing advice was to reduce the company's share capital to a nominal £1 before going for strike off under chapter 10 of CA 2006.
Given the avalanche of queries on the subject, Jennifer Adams set out to clarify the situation for her guide to striking off a company. While researching the precise legal situation, she discovered a subsequent message from the Treasury Solicitor published on the ICAEW Tax Faculty website that said: “The Treasury Solicitors’ Office has now totally rewritten their guidance and stated categorically that they will not take action to recover share capital under bona vacantia.”
While the right to recall unauthorised share capital of struck-off companies would still vest in the Crown, the Treasury Solicitors’ guidelines confirm that they will not attempt to recover any unauthorised distributions of share capital prior to dissolution.