MVL distribution shareholders entitlement MVL distribution shareholders entitlement
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  1. #1

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    Question MVL distribution shareholders entitlement

    Liquidating my company via MVL. I am 80% share holder, my wife 20% with hers being ordinary-b shares with dividends rights.

    Based on the advice I recieved from my accountant, she is not entitled to capital distribution as per the shares allotment document on company house, it only mentions her right to dividends.

    However, the liquidator now is in charge, and they refuted that saying that it's within my right as a director to decide if I want the capital to be distributed to her as a shareholder, and that nothing in her shares restrict her from receiving capital distribution.

    I am very happy for the capital to be distributed to the both of us, so hopefully we can both benefit from CGT allowance.

    Looking for some advice please.

  2. #2

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    The type of shares inform you what rights you have. If you don't have ordinary shares with 'rights to capital on a winding up' I can't see how you can pay out a capital distribution.

    I agree with your accountant.

    By the way, just as well you are winding up, those type of shares to your wife, with no voting rights etc. are a sure sign of falling foul of the setlements legislation.

  3. #3

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    The liquidator should be better qualified. I'd be inclined to go with that advice.

    In general the accountant would be right, but it's entirely possible that the B-class shares do denote ownership. Although they generally don't.
    The cynic in me says that the liquidator will say whatever he needs to to get the business, buit then doesn't get past the fact that it's his profession.
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  4. #4

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    Quote Originally Posted by craigy1874 View Post
    The type of shares inform you what rights you have. If you don't have ordinary shares with 'rights to capital on a winding up' I can't see how you can pay out a capital distribution.

    I agree with your accountant.

    By the way, just as well you are winding up, those type of shares to your wife, with no voting rights etc. are a sure sign of falling foul of the setlements legislation.
    in general I agree.

    but.....
    this is more complex than explained.
    If he has 80% and she has 20% but they are different class of shares then it doesn't add up. Who has the other 20% of ordinary shares? Who has the other 80% of B-class shares.

    Maybe more detail about the exact details of the share classes wil be forthcoming.
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  5. #5

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    I was liquidating on the assumption that my wife is not entitled to captial distribution based on accountant advise.

    It was the liquidator who refuted that, and asked me to indicate if I would like captial to be distributed to her as per my right as a director.

    It doesn't make any difference for the liquidator in terms of their profit or business, they are already assigned as my company liquidators.

    My understanding is that I have ceased control over my company and it's now in liquidator's control.

    I am not sure what other shares @lance? The sharea are as per my post.

  6. #6

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    Quote Originally Posted by mrdarcey View Post
    I was liquidating on the assumption that my wife is not entitled to captial distribution based on accountant advise.

    It was the liquidator who refuted that, and asked me to indicate if I would like captial to be distributed to her as per my right as a director.

    It doesn't make any difference for the liquidator in terms of their profit or business, they are already assigned as my company liquidators.

    My understanding is that I have ceased control over my company and it's now in liquidator's control.

    I am not sure what other shares @lance? The sharea are as per my post.
    if you have 80% of class A shares who has the other 20%?
    If your wife has 20% of the class B shares who has the other 80%

    Or do you have 100% of class A, and she has 100% of class B? That seems more likely but that means she doesn't have 20%.
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  7. #7

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    Quote Originally Posted by Lance View Post
    in general I agree.

    but.....
    this is more complex than explained.
    If he has 80% and she has 20% but they are different class of shares then it doesn't add up. Who has the other 20% of ordinary shares? Who has the other 80% of B-class shares.

    Maybe more detail about the exact details of the share classes wil be forthcoming.
    Pretty obvious, 80% of the shares are ordinary (he owns), 20% are B-class (she owns). It's not 80-20 of each kind, it's 80-20 total.

    OP -- how are the shares described in the company's official documents? Do the articles of incorporation address this? Is this addressed specifically in regard to either class of shares, or to both? If there is distinctly different wording on the two classes in regard to this, it's hard to argue that they should be treated the same. If it is the same, either by addressing the question directly or by not addressing it at all, then your liquidator might have a case.

    Also, are you claiming ER? And is your wife a director or secretary? And how much money are we talking?

    Because if you are claiming ER and your wife is not a company office-holder, I think that means she's not eligible for ER. Which would mean, depending on the amount, you might be better off just paying it all to you anyway. If her payout is £24K, the tax hit on the second £12K would cancel the benefit of the CG allowance, if she doesn't get ER.

    Also, if you are claiming ER, let's be clear, the benefit is 10% of up to £12K (if that would be her share). £1200 will get the two of you a nice long weekend away somewhere where you can catch coronavirus, but it's not really that big of a deal.

    So, if you are claiming ER it's not a lot of money, and if you aren't, depending on how much money it is, it might cost you money. FWIW.

  8. #8

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    Quote Originally Posted by WordIsBond View Post
    Pretty obvious, 80% of the shares are ordinary (he owns), 20% are B-class (she owns). It's not 80-20 of each kind, it's 80-20 total.
    That might be the case but it's not obvious.
    When the shares are a different class you cannot just compare them as equal and say he has 80% and she has 20%.
    And there may be 1 class A share, and 1,000 class B shares. I've seen that setup before.
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  9. #9

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    @WordIsBond - very good point about ER. she's not a director or a secretary, we haven't considered ER on her distribution yet but as per what you said I am assuming she wouldn't be eligable.

    It would work out better with her being able to claim ER 10%, and slightly better with 20% CGT - as opposed to all capital distributed to me.

    In the company shares article, there's clear distinction between her shares and mine. Hers only mention "flexible dividend rights" - while mine has voting rights and right to capital.

    That is why I don't understand the liquidator's approach to it, and whether it's up to me to decide otherwise, and how does my acocuntant advice fit in all of this.

    I am yet to hear back from my accountant.

  10. #10

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    Is it your account that suggested this mess in the first place?
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