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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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.
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?
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
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?
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.
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?
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.
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’?
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.
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
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.
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.
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.
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.
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.)
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.
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.
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.
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.
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.