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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3655
Experience:  Solicitors 2 years plus PQE
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We have a private limited company client with about fifty shareholders

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We have a private limited company client with about fifty shareholders and £700K issued ordinary one pound shares.
The directors have encashed all the assets with the exception of a £100K holding of ordinary shares in another private limited company in which there is not a controlling interest. There is currently circa £700k in the company bank account. All the shareholders want a return of their shares as soon as possible in the form of cash. Will the company qualify for a capital reduction scheme at this stage? What are the company law and tax requirements if this is possible? If the shareholders have to wait until the £100K shareholding is encashed, what is the most efficient way to liquidate the company, bearing in mind the only asset will be the money in the bank.
Submitted: 1 year ago.
Category: Law
Expert:  Alex J. replied 1 year ago.
Hi, Thank you for your question and welcome. My name is ***** ***** I will assist you. Does the company have any creditors, has all the cash been declared as company "profit"?
Customer: replied 1 year ago.
The company does not have any creditors. The company traded for a number of years and paid corporation tax on any profits generated. The current share price is £1.15 approx. which is reflected in the bank holding of £700k and the private company investment.
Expert:  Alex J. replied 1 year ago.
Hi, Thank you. If there are no creditors, then the shareholders can vote to put the company into a solvent liquidation and distribute the value of their shares. Do all the shareholders agree with this plan of action? Kind regards AJ
Customer: replied 1 year ago.
All the shareholders agree to the eventual liquidation of the company. However it could take up to a year to realise the one remaining asset. Can the cash in the bank be repaid to the shareholders now in advance of the eventual liquidation?
Expert:  Alex J. replied 1 year ago.
Hi, Thank you. Yes it is possible and there are various ways this can be done:(i) Some of the money could be declared as profit by the directors and the company could make a dividend distrbution;(ii) The company could by back some of the shares of each shareholder out of its capital at an agreed price - thus reducing the number of shares and share capital;(iii) The company could make a distribution "in specie" of the company's capital. This requires an ordinary resolution.The problem many of these options is that it would likely require a statement from the company accountant confirming its solvency and (certainly for a share buyback out of capital) a statement of solvency from the company directors.The question really is what would the directors be prepared to support?
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