Alston & Bird
5 Experts
2 Contributions by Alston & Bird Experts
PRACTICE NOTES
This Practice Note explores the use of section 110 of the Insolvency Act 1986 (IA 1986) — commonly termed section 110 arrangements, section 110 demergers, section 110 schemes, section 110 transfers, section 110 liquidation schemes, or section 110 reconstructions. It addresses their key purpose, the standard transaction structure, the reconstruction agreement, how dissenting shareholders may contest, and tax matters.
What is a section 110 arrangement?
A section 110 arrangement is a statutory device to separate or demerge undertakings or assets sitting in, or owned by, a single corporate body, so that following the deal they are held by two or more corporate bodies. Such arrangements are available only within a voluntary winding up, usually a solvent winding up, i.e. a members’ voluntary liquidation (MVL). With preparation they can deliver tax efficiency compared with alternative routes. In its basic form, a section 110
Restructuring & Insolvency
CHECKLISTS
Arrangements under section 110 of the Insolvency Act 1986 (IA 1986) (section 110 arrangements)
Section 110 arrangements are frequently adopted to separate a company’s business and/or assets into distinct undertakings. They are available only within a voluntary liquidation and, with appropriate planning, can be notably tax‑efficient.
In essence, a section 110 arrangement is a three‑party framework between:
the company in liquidation (the Transferor), acting through its liquidator (the Liquidator)
a newly incorporated entity acquiring some or all of that business and/or assets (the Transferee)
the Transferor’s shareholders
Typically, the Transferor’s shareholders receive, via the Liquidator, an in specie distribution in the winding up comprising shares in the Transferee, which make up all or part of the consideration for the transfer. Business or asset splits can be effected and, accordingly, there may be more than one Transferee. For further detail, see Practice Note:
Restructuring & Insolvency
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