UK Zombie companies – how serious is the problem?
June 29, 2022
This type of restructuring is often used to dissolve a company that is no longer needed. For groups, this process can improve its overall value. In both cases, it allows funds to be returned tax efficiently and increases shareholder returns. There are also additional types of restructuring procedures that can be used to simplify a group structure.
There are various procedures, which can be deployed to achieve the objectives agreed with the shareholders of a single or a group of companies, including:
This is a formal procedure under the Insolvency Act 1986 requiring the appointment of a licensed Insolvency Practitioner. Benefits include the formal agreement of creditor claims. All payments to shareholders are treated as a realisation of the investment and not as dividend income, which may give tax savings and possibly attract Entrepreneurs’ Relief, now known as Business Asset Disposal Relief, resulting in a tax rate of 10%.
If you are ready to close your business through a MVL, complete the questionnaire which will be sent directly to our MVL team who will then send you a Letter of Engagement for you to sign before any work commences. Alternatively, if you would like to speak to one of our team first, please call 0121 222 4140.
There are a number of other processes that can be used to restructure:
The simplification of a complex corporate structure or the extraction of value for shareholders is a highly technical area, requiring careful analysis and consideration of a whole range of legal and tax considerations.
The type of projects involved in this work can include:
A simplified procedure under the Companies Act 2006 enabling alteration of the capital structure of a company. Benefits include the elimination of negative balance sheet reserves enabling dividends to be paid, or the buying back of shares, which otherwise would not be permitted.
An allowance given by HMRC allowing payment from a company to the shareholders as if there had been a Liquidation. Benefits include lower costs through avoiding a liquidation process. It is restricted to a maximum of £25,000 capital value.
The removal of a company from the Companies House Register through a direct application made by the directors. Benefits include substantially lower costs than with a formal liquidation procedure.
For more information on Members’ Voluntary Liquidation, we offer an initial free consultation to review the situation and make recommendations on the best way forward. If we think that a Members’ Voluntary Liquidation is the best route forward, our specialists can support the business at every step of the way through the process.
Contact our Head Office on +44 (0) 20 3326 6454 to arrange a no obligation and confidential call with one of our Partners.
“Our firm has worked with Opus for many years and with one of the partners in particular, Jo Rolls. I have attended a number of meetings with Jo when our clients have needed guidance on restructuring their business at a time when they have been facing financial challenges. Jo has always demonstrated a clear understanding of the clients’ needs from the outset. Her attention to details and diligent advice have proved invaluable to the business at a time when the directors needed it most. I would have no hesitation in recommending Opus to anyone wishing to use their services”