Liquidation (MVL) capital distribution advise

Liquidator giving wife right to capital distribution although her shares don't state that

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Liquidating my company via MVL. I am 80% share holder, my wife 20% with hers being ordinary-b shares with dividends rights.

Based on the advise I recieved from my accountant, she is not entitled to capital distribution as per the shares allotment document on company house, it only mentions her right to dividends.

However, the liquidator now is in charge, and they refuted that saying that it's within my right as a director to decide if I want the capital to be distributed to her as a shareholder, and that nothing in her shares restrict her from receiving capital distribution.

I am very happy for the capital to be distributed to the both of us, so hopefully we can both benefit from CGT allowance.

Looking for some advise please.

Replies (31)

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By Accountant A
15th Jun 2020 20:44

=

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Psycho
By Wilson Philips
03rd Mar 2020 11:27

I'm not an insolvency expert, but I wouldn't have thought that the appointment of a liquidator displaces the rights (or lack of them) attaching to shares. However, that is not to say that the Articles (ie rights) cannot be amended. Whether this would 'work', though, is debatable. Perhaps you could enlighten us as to EXACTLY what rights the B shares have per the Articles.

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Replying to Wilson Philips:
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By mrdarcey
03rd Mar 2020 11:44

All that's mentioned is "rights to dividends" on my wife's shares.

That's why I find it confusing.

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Replying to mrdarcey:
Psycho
By Wilson Philips
03rd Mar 2020 12:11

I'd be willing to bet a small fortune that the Articles do not simply say "rights to dividends". Come on, help us (and yourself) out here - what is the precise wording of the Articles. Or, as a start, what exactly does the Statement of Capital lodged at Companies House say?

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By frankfx
03rd Mar 2020 11:53

The liquidator is more than capable of providing you with chapter and verse, to give you the comfort and assurances required.

It appears your tax position may be optimised by liquidator actions.

Again simply request clarification from the liquidator that should Hmrc query your self assessment returns that you are on safe ground.

Do ask the liquidator what his charges are for this service.

You may want to let your accountant know the outcome, we are always learning and un- learning.

Did your accountant introduce you to the liquidator.

If yes, out of professional curiosity he could at least speak to liquidator.

If no, ditto.

Please kindly let us know the outcome , many AWEB readers would be obliged to you.

a good question, I am sure it will have a simple well honed professional answer.

Thank you

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By mrdarcey
03rd Mar 2020 13:01

Thanks all for replying.

Exact wording for wife's share "flexible dividend rights" no more, no less. And share class is "b ordinary" (not even voting rights but i presume those are implicit and inferred from shareholding?)

Just to clarify, I am not requsting a quote from the liquidator, the liquidator is already appointed and he contacted me with the distribution information as per my post.

The accountant did introduce me to the liquidator, they are well known liquidator. The accountant is in the loop on all this but haven't come back yet.

I did ask the liquidator for clarification, and they clarified that the accountant advise was wrong to begin with( that my wife didn't have rights to captial distribution) - she does.

I am yet to hear back further clarification from my accountant.

But my understanding is that this is the liquidator decision as I have ceased control of my company.

It seems that accountant and liquidator do have conflicting opinions on this, but I am not sure if I am meant to be the one deciding or accept the liquidator's decision.

Will update this thread once I know more.

Still appreciate any advice(with a "c") if anyone had similar experience.

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Replying to mrdarcey:
Psycho
By Wilson Philips
03rd Mar 2020 13:56

So, if I were to look at the Statement of Capital on Companies House the ONLY wording that I would see in respect of the B shares is “flexible dividend rights”? No preamble, nothing else - just those exact words?

In absence of anything else, those words are rather toothless. In any event, in absence of any wording to the contrary, it is implicit that the shares have exactly the same rights as any other ordinary share. Why did your accountant believe that there is no entitlement to capital?

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Replying to Wilson Philips:
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By Tax Dragon
03rd Mar 2020 14:10

This isn't my field, but presumably by "implicit" you mean something like "imputed by [company] law". You'd want those imputations, I suggest, to maintain alignment as far as possible with Arctic Systems and the protection it affords.

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Replying to Wilson Philips:
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By mrdarcey
03rd Mar 2020 14:41

@Wilson that's correct, that's the only thing mentioned under "prescribed particulars" for wife's b shares.

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Replying to mrdarcey:
Psycho
By Wilson Philips
03rd Mar 2020 14:52

In which case I would say that your accountant is wrong. I'd still be interested to hear why he thinks that the shares carry no entitlement to capital.

For completeness, what is said about the husband's share class?

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Replying to Wilson Philips:
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By mrdarcey
04th Mar 2020 08:21

Not exact wording, but "right to vote, dividends, right to capital distribution(and upon winding up)" - it does have explicit mention of winding up in brackets.

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Replying to mrdarcey:
Psycho
By Wilson Philips
04th Mar 2020 09:15

OK - there may be an argument here that the B shares do not have right to capital if the other shares rights specifically refer to such a right and the B's do not. I would suggest that this is a question for neither the liquidator nor your accountant but a company law adviser. It sounds as though the documents have been rather shoddily worded.

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Replying to Wilson Philips:
ALISK
By atleastisoundknowledgable...
04th Mar 2020 08:52

Wilson Philips wrote:

In absence of anything else, those words are rather toothless. In any event, in absence of any wording to the contrary, it is implicit that the shares have exactly the same rights as any other ordinary share.

So do all my H&W b shares now have to explicitly say ‘no voting rights’, rather than just not saying ‘holds voting rights’?

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Replying to atleastisoundknowledgable...:
Psycho
By Wilson Philips
04th Mar 2020 09:19

I would suggest that it may depend on what the Articles/Statement of Capital say regarding the 'a' shares. Properly drafted Articles etc will state exactly what rights the various classes of share do and do not have.

For instance, a shares have full voting rights, right to dividends and to participate in capital. b shares rank pari passu with the a shares except that they do not have voting rights.

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Replying to Wilson Philips:
ALISK
By atleastisoundknowledgable...
04th Mar 2020 09:25

Assume standard M&As.
A shares : have full voting rights, right to dividends and to distributions.
B shares : have rights to dividends and to distributions.

Do I need to be more explicit?
Thanks

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Replying to atleastisoundknowledgable...:
Psycho
By Wilson Philips
04th Mar 2020 09:49

I don't know. I think that one could reasonably infer that the B shares have no voting rights but one for the legals to confirm. Personally, I would prefer an explicit statement.

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Replying to Wilson Philips:
ALISK
By atleastisoundknowledgable...
04th Mar 2020 09:54

Ok thanks - I will going forwards

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Replying to atleastisoundknowledgable...:
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By Tax Dragon
04th Mar 2020 11:05

What's wrong with the shares having votes?

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Replying to Tax Dragon:
ALISK
By atleastisoundknowledgable...
04th Mar 2020 11:35

Tax Dragon wrote:

What's wrong with the shares having votes?

What happens when the H+W divorce and she has voting shares in his company?
It happened at one of my previous firms, so now my default position is non-voting, unless the client really wants otherwise.

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Replying to atleastisoundknowledgable...:
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By Tax Dragon
04th Mar 2020 12:36

How much extra did she get from her ability to vote? Shareholders can attend meetings whether or not they can vote at them.

Meanwhile, votes might give advantages. ER, for example. Indeed, according to one of the contributors in that thread that JCresswellTax spotted, votes are essential to avoid the settlements rules applying. I don't go that far, but I do see the point.

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Replying to Tax Dragon:
ALISK
By atleastisoundknowledgable...
04th Mar 2020 12:45

The time it was an issue, it was 50/50 and she put a (Ed. the?) kibosh any everything and brought the company to it's knees.

I should maybe have 95/5 to allow for ER.

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Replying to atleastisoundknowledgable...:
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By Tax Dragon
04th Mar 2020 14:59

If only the legal advisors had thought to include a casting vote when setting that up. Or the accountant had thought to suggest 51/49. (Or even 61/59.)

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Replying to Tax Dragon:
ALISK
By atleastisoundknowledgable...
04th Mar 2020 15:02

If only. Or 76/24 would've been even better.
Glad that it definitely absolutely wasn't me as a PQ with 2 years experience who was left to make that decision.

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Replying to atleastisoundknowledgable...:
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By Tax Dragon
04th Mar 2020 15:13

Wait, you didn't tell me this was all 40 years ago.

I wouldn't be relying on that for my knowledge of entitlements on divorce.

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By Mr_awol
04th Mar 2020 10:52

To be honest, unless you state the name of the company in order that we can see what has been filed, we are unlikely to be able to answer properly.

Either way, I’d have thought a better solution for you is to email the liquidator and accountant that know your exact circumstances (copies in on the same email) and ask them to clarify. It is your accountant that will be completing your SATR (presumably) and if it were me I wouldn’t be taking the liquidators word if I was confident I was correct. I would however check with someone else in the office and consult my technical advice line if necessary but in order to do that I’d probably need to know why the IP had a different opinion.

If the accountant is right on the capital distribution rights I have to wonder why they didn’t advise you to gift* c£12k worth of capital participating shares to your wife before the IP began their work...…

*Edit:
Gift. Not hide. Not sure why my phone changed that or what I'd typed originally but hide makes no sense and makes it look like im suggesting something dodgy.

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Replying to Mr_awol:
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By mrdarcey
04th Mar 2020 08:28

That's what's happening currently, the accountant is discussing it with the liquidator and I am waiting to hear back. The main reason I posted here is that I am obviously unqualified to decide what's the right way to proceed, and should I be asked by liquidator or accountant that I need to make that decision then the responses I receive here would help.

Further, I am not entirely sure if I am meant to be making the decision of how is capital distributed, as to my knowledge I have ceased control of my company when liquidator was assigned.

Good point about why accountant didn't suggest 12k savings, it's likely an oversight. I will check.

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Replying to mrdarcey:
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By Mr_awol
04th Mar 2020 11:04

mrdarcey wrote:

That's what's happening currently, the accountant is discussing it with the liquidator and I am waiting to hear back. The main reason I posted here is that I am obviously unqualified to decide what's the right way to proceed, and should I be asked by liquidator or accountant that I need to make that decision then the responses I receive here would help.

Further, I am not entirely sure if I am meant to be making the decision of how is capital distributed, as to my knowledge I have ceased control of my company when liquidator was assigned.

Good point about why accountant didn't suggest 12k savings, it's likely an oversight. I will check.

To be honest you don't need to be qualified or to make a decision. The IP says one thing, the accountant another. You've emailed them both (together, not separately, hopefully) and they can hammer it out and reply jointly. As long as they are both on the same page by the end, you're fine. If they still disagree, then that is the time to try and find out who is right (but as mentioned nobody can actually answer that without seeing the full detail of all the CoHo filings, not just the bits where the answers should normally be).

Unfortunately it wont be £12k savings (or perhaps fortunately for your accountant it wont be). If the IP is right then it would have made no difference. If the accountant is right then the saving would have been either £Nil, £1,200 or £2,400 - depending on whether your wife had any other gains, whether you are eligible for ER, etc.

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Replying to Mr_awol:
ALISK
By atleastisoundknowledgable...
04th Mar 2020 11:34

Mr_awol wrote:

Gift. Not hide. ... im suggesting something dodgy.

God forbid.

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By frankfx
04th Mar 2020 09:24

12k tax allowance an oversight?

All the contributors here would have had their howitzer lined up on the that from the get go.

And if you were slow to respond, sent Jack Russell round to chivvy you up.

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By JCresswellTax
04th Mar 2020 10:17

Ask on contractor UK, don't like the response...try again on accounting web.

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By mrdarcey
04th Mar 2020 15:58

Thanks for all the replies, it's very useful. The accountant will be filling SATR at some point, so I think best course of action is for them to be satisfied with liquidator assessment.

Apologies for people who took offence to me posting on different mediums - but contrary to an assumption that was made, it has absolutely nothing to do with me not liking answers.

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