The client is the sole shareholder and Director of a solvent trading company. He wants to employ an insolvency practitioner to instigate a formal members voluntary liquidation. Does he need to apply for ESC 16? I don't think he does as this seems to apply only to companies being dissolved under s652 & 652a CA
Also will Entrepreneurs Relief be available on the ulimate cash distribution?
Any help gratefully received
Related resources
Replies (5)
Please login or register to join the discussion.
Eh?
If the company is liquidated formally, the final distribution (after deduction of the insolvency practitioner's not inconsiderable fees) is treated as capital, i.e: as a capital gain on the original investment in the share capital of the company. ESC C16 is a concession which merely extends the capital treatment to the final distribution when the company is dissolved informally, i.e: a striking off under s.1003 CA 2006, so is not relevant for a formal liquidation.
ER would normally be available to the sole shareholder of a trading company.
Why would the client not want to save himself the IP's fees by opting instead for a striking off? If he did, ESC C16 obviously would be applicable.
ESC or NOT?
The IP is charging £3500 and the cash balance is £300000. The client feels to have it done "properly" is worth it
more money than sense, perhaps
there's nothing 'improper' or wrong about an informal striking-off under ESC16. But it takes all kinds, I suppose - I'm sure the IP is rubbing his hands - money for old rope. There is one question, though - what is the share capital? Perhaps formal liquidation is in fact required to avoid bona vacantia?
The issue ....
is presumably one of whether the £300k was part of the trading business working capital or might be viewed as an investment asset for ER purposes. I suspect the client is trying to buy his way to a favourable treatment!