Changes triggered by ease of reducing share capital under Companies Act 2006
The Bona Vacantia Division of the Treasury Solicitor’s Department has withdrawn, with effect from 14 October 2011, its Guidelines about the Distribution of a Company’s Share Capital (Guidelines BVC17). The consequence is that there is no need to contact the Bona Vacantia Division before distributing share capital of any amount prior to a dissolution. (All other rules on share capital distribution remain applicable.)
Under the Guidelines, the Treasury Solicitor made a concession that it would not seek to exercise the Crown’s rights to any funds that were unlawfully distributed to shareholders prior to the dissolution of a company, provided that:
- The company had been struck off under Sections 652A of the Companies Act 1985 or Section 1003 of the Companies Act 2006 (the sections dealing with a company voluntarily applying to be struck off); and
- The shareholders have taken advantage of HMRC’s extra statutory concession C16 (which permits a distribution for tax purposes without the company having to incur the costs of a formal liquidation); and
- The amount of the distribution was £4,000 or less.
The Treasury Solicitor has withdrawn the Guidelines because the Companies Act 2006 has made it easier to reduce and pay back share capital. The greater ease with which share capital of any amount can be distributed to shareholders prior to dissolution made the concession in the Guidelines less relevant.
The Treasury Solicitor has published a series of FAQs on the withdrawal of the Guidelines, which can be read here. The to-be-withdrawn Guidelines are here.
The withdrawal of the Guidelines has no impact on HMRC’s extra statutory concession 16.
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