Case Study: Solvent liquidation - Group of companies
Background
An existing client of Armstrong Watson was planning to sell their business and had been approached by a competitor with a significant offer for the trade and business.
They were keen to ensure that the potential return of the capital back to members – all of which were family – was maximised and engaged the services of our Restructuring and Insolvency Team and Tax department to assist.
The business was structured as a small group of companies – a parent company and two fully-owned subsidiaries. The proposed sale of the business and trade was to be completed within one of the trading subsidiaries and would result in a substantial cash balance.
How we helped
In conjunction with our Tax team, we advised the client that the solvent liquidation or Members Voluntary Liquidation (MVL) of all three companies would enable the capital held within the two subsidiaries to be distributed to the parent company, which could then be subsequently distributed to the members. The MVL would provide comfort to the members that all possible claims in the three companies would be dealt with as well as ensuring that the clearance from HMRC would be sought and obtained.
As the two subsidiaries had been trading and the trade was sold to a competitor, the sale and purchase agreement (SPA) included a provision that our client would assist the purchaser for a set period to ensure the transfer of the business was efficient. We worked with our client during this period to ensure that any assets or items not included within the sale had been dealt with. This included ensuring that any employees who did not transfer under Transfer of Undertakings (Protection of Employment) Regulations (TUPE) were given proper notice and received the sums due to them in accordance with their contracts. In addition, we also provided advice regarding the leased premises that the companies traded from.
Collaborative expertise
Once the required handover period was completed, we worked with our Accounting team, in respect of the latest balance sheet which would then be used to prepare the required declaration of solvency. To minimise any statutory interest arising within the liquidations, we also liaised with our client, and both our Accounting and Tax departments to ensure that any final Corporation Tax liabilities had been calculated and a payment on account made before the commencement of the MVL.
Following our appointment, we ensured that all of the statutory notices were filed, we secured the cash that was held in each of the respective companies' bank accounts and liaised with HMRC in respect of obtaining clearance for all three entities. Furthermore, we liaised with the client in respect of the timing of the distributions to the members, completing an initial significant cash distribution shortly after appointment.
The liquidations of all three companies have now been concluded and they will all be dissolved shortly.
If you’re thinking about selling your business and would like advice and support about the best way forward please get in touch on 0808 144 5575 or email help@armstrongwatson.co.uk
