When a company has completed its purpose, or the directors of a company decide to retire, a Tax efficient way of releasing the surplus which may have accumulated is to place the company into a Members Voluntary Liquidation.
The Tax advantage for shareholders is that a capital gain received on their shares will only be taxed at 25% (22% up to 7 April 2009), whereas if the surplus monies were taken out as salary, then these monies may be taxed at a much higher marginal tax rate.
To place a company into a Members Voluntary Liquidation, the directors must swear a Statutory Declaration of Solvency. This Declaration summarises the company's assets and liabilities and the directors state that the company will be able to pay all of its debts in full within 12 months of the commencement of the Liquidation. There may be serious consequences for the directors if they swear a Declaration of Solvency which is inaccurate.
Once the Declaration is sworn, a copy of it must be sent to all shareholders, togther with a formal notice of the shareholders meeting. At the shareholders meeting, a special resolution must be passed i.e. 75% of the shareholders voting must vote in favour of the resolution.
A popular way to distribute certian assets to shareholders is to distribute them in specie i.e in kind. Thus, freehold property may be transferred to shareholders directly. A significant advantage of in specie distributions is that no stamp duty is payable.
While the Companies Acts do not specifically identify who is qualified to be a liquidator of a company, Section 300A of the 1963 Companies Act makes it an offence for certain individuals, including an auditor, servant (e.g. accountant) or officer of the company to act as its liquidator.
As authors of "The Practitioners' Guide to Members Voluntary Liquidations", we specialise in this area, and we have streamlined procedures in place to expedite the completion of Members Voluntary Liquidations.
We provide free estimates/quotations for carrying out Members Voluntary Liquidations.
For further information please contact Jim Stafford or Tom Murray on 01 661 4066 or
stafford@liquidation.ie
or
murray@liquidation.ie