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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3791
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.
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 2 years 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.
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 2 years 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?
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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