ADVERTORIAL
INSTRUCTING AN INSOLVENCY PRACTITIONER
ISN’T ALWAYS BAD NEWS Most people don’t usually look forward to seeing an insolvency practitioner – but as the team at Hart Shaw explain, their work is not all about saving failing companies A bit like going to the dentist, most people don’t usually look forward to seeing an insolvency practitioner. They assume it will be a painful experience and they will only receive bad news. Of course, this is not the reality that most people experience. No matter how bad the situation people think they are in, they often leave their first meeting with us with a clear idea of what needs to be done and feeling the weight of the world has been lifted from their shoulders. But the work we do is not all about saving failing companies. We also provide advice and help to people with successful solvent companies and one of the formal processes we offer is the Members Voluntary Liquidation. This is where we help close and liquidate a solvent company that is no longer required in order to pay its capital value to the shareholders.
unLTDBUSINESS.COM
A limited company exists in its own right as a legal entity independent of its shareholders and it can own businesses, property and generate wealth. During its life surplus profits can be distributed to the shareholders by the payment of dividends, such dividends being accounted for as part of the shareholders income and taxed accordingly. However, when a company comes to the end of its natural life, such as when its business has been sold and the shareholders are looking to cash in the value of their shares, it is often more appropriate, and tax efficient, for its value to be returned to its shareholders as a capital payment rather than as income by declaring a dividend. This is achieved with a Members Voluntary Liquidation which can only be carried out by a licenced insolvency practitioner. The insolvency practitioner
will work with the directors to prepare the company for liquidation so as to end up with a balance sheet that often comprises just cash at bank. The directors then make a Statutory Declaration of Solvency to confirm that the company is solvent and can pay its debts in full and the shareholders pass resolutions placing the company into liquidation. Once in liquidation, the liquidator goes through a process to establish that the company has paid all its creditors before distributing the company’s assets to the shareholders as a capital distribution. Although we often just distribute cash, it is possible to distribute assets – for example a property – direct to shareholders which is called a distribution in specie. In recent weeks we have distributed in specie three residential properties in one liquidation, a trade debtor in another and a stock market
portfolio in another. As a member’s voluntary liquidator is acting for the shareholders, (as creditors have been paid in full) he or she can, within reason, do whatever the shareholders require, so a Members Voluntary Liquidation can be very flexible. As a busy practice, we carry out Members Voluntary Liquidations throughout the year for all types of companies and businesses. However, in recent weeks we have been particularly busy with such liquidations as our clients have been keen to liquidate their companies and distribute the funds to shareholders before the Budget on 3 March, in case taxes are increased. A Members Voluntary Liquidation is a cost-effective way of closing a company that is no longer required and returning its capital to shareholders and, depending on the circumstances, can be a very flexible process.
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