Striking off -ongoing PI obligations

Final accounts - professional services firm has ongoing obligations for run off PI cover

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A Ltd company professional services firm is planning to get struck off. There are ongoing obligations re professional indemnity cover (which will involve data retention) -the shareholders are willing to assume these obligations and will provide an undertaking to the company. 

The intention is to provide for the estimated cost of the obligations &  credit the shareholders' loan accounts. The bank balance (after settling CT) will be paid over to the shareholders (with the bank balance less shareholders' loan being the value of the distribution).   [NB: All actual liabilities at the point of striking off would have been settled]. 

Do you see any issues with the approach?  Does anything need to be done specifically when communicating with HMRC?

Replies (2)

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By Merseyside Mike
31st Jul 2022 11:27

Usually, when a company is no longer trading a "Runoff" Professional Indemnity cover can be purchased with a single policy period of up to 6 years.

This would mean a single payment made by the company prior to it being struck off, and then the directors can retire happily knowing that their potential liabilities are covered and paid for by the company without needing to sort out and pay for renewal every year.

Thanks (3)
Replying to Merseyside Mike:
By David_Lewis
31st Jul 2022 11:39

Thanks - that's what I thought - but in this instance the brokers have advised that the payment must be made at the renewal date. Also (although fairly small) there will be costs regarding data retention and secure destruction during the run off period).

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