If the directors of a company are confident that the company is solvent (i.e. have enough assets to pay all the debts of the company), but wish to put it into voluntary liquidation, they will need to prepare and swear a Declaration of Solvency, which an insolvency practitioner can assist with. The Declaration of Solvency includes a statement of the company’s assets and liabilities and demonstrates that the company is solvent.

Process of solvent liquidation

The shareholders then resolve to wind up the company and appoint a Liquidator. There is no need for a creditors’ meeting as the directors have “sworn” that the company can pay its debts in full.

The liquidator pays dividends to shareholders from the surplus funds after covering the outstanding liabilities. It is always advisable for most, if not all, of the company’s liabilities to be settled before the company proceeds into Liquidation as statutory interest, at 8%, has to be paid on all outstanding liabilities once the company is in liquidation.

Once all the liabilities, plus statutory interest, have been paid, surplus funds are distributed to shareholders. If there is property within the company, this can be transferred to shareholders rather than realised, as a “distribution in specie”. The tax implications of distributions to shareholders need to be carefully considered to minimise any potential liability and we can also advise on this through Kingston Smith LLP.

Kingston Smith and Partners are able to assist through the members’ voluntary liquidation process and Kingston Smith LLP are able to advise businesses about the tax implications of distributions to shareholders to minimise any potential liability.

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