With effect from 14 October 2011 the Treasury’s relaxation on bona vacantia has been withdrawn. This means that where any share capital and undistributable reserves are passed to shareholders before a striking off it will be an unauthorised distribution and the Crown could claim the amounts back from shareholders.
Until this change the Crown, by concession, did not claim assets in the case of a striking off where the company’s share capital distributed to the shareholders was £4,000 or less..
The withdrawal of the bona vacantia relaxation will cause problems where:
- shareholders opt for an informal striking off of the company under ESC C16; and
- there is more than nominal share capital; and
ESC C16 itself which allows certain distributions to be made as capital rather than income distributions on the striking off of a company has also been subject to consultation and draft legislation in December 2010 indicated how HMRC intend to enact the concession in a restricted way – limiting the capital distribution to no more than £4,000.
The team at Gabelle have experience in dealing with companies where the shareholders do not wish to use a formal liquidation but yet want to avoid this bona vacantia issue. In these cases practitioners could consider a reduction of share capital in advance of a striking off or the company could be converted to an unlimited company.
Where there are shareholders wishing to strike off a company the case should be reviewed to ensure that the tax position is optimised and that illegal distributions are avoided.