Reclaim fears over assets of dissolved firm

AF writes: I hold 20% of a property company. The share capital is significant as are the revaluation reserves. The assets can be sold and the company turned into a cash shell. There would be a capital gain but with indexation relief no tax would be due. The revaluation reserve could then be distributed as a dividend. But distributing the capital as dividends using the Inland Revenue concession C 16 is causing concern. I am told the Duchy of Cornwall could resurrect the company after its dissolution and claim from shareholders the capital previously distributed. Is this right?

Answer

The issue relates to the situation where a company is struck off the register of companies or a company is dissolved and still holds assets. Any property and rights in the company immediately before its dissolution are deemed bona vacantia - assets vested in the Crown, the Duchy of Lancaster or Duchy of Cornwall depending on the location. Therefore all the assets need to be dealt with prior to getting the company dissolved or struck from the register. The Revenue concession C 16 relates to the taxation and allows the company to treat the distribution of reserves as a capital dividend on the basis that it is going to be dissolved. Revenue clearance is needed but is simple. This will enable you to distribute the realised reserves after the properties have been sold. This leaves the issue of the share capital. This cannot be returned to shareholders by dividend and has to be either distributed by formal liquidation or an application to the courts for a share-capital reduction. The latter is not applicable as this has to be for the benefit of the trade. A formal liquidation is needed to deal with the issue of returning the share capital to investors. This will involve fees to a liquidator. If the capital is less than the fees the best option would be to apply for the company to be struck off after paying out the reserves, leaving the remaining capital to become bona vacantia. This course of action will depend upon the level of your share capital.