Dividend (Insolvency) meaning

This Checklist outlines the position in relation to a creditors’ voluntary liquidation (CVL) with effect from 6 April 2017. Notifications The appointed liquidator must provide the registrar of companies with the following: a copy of the statement of affairs, to be delivered within five business days after the conclusion of the decision procedure or deemed consent procedure relating to the liquidator’s appointment a copy of the notice of appointment of liquidator, to be sent within 14 days of the appointment The registrar of companies should be notified using Form 600CH. If the liquidator chooses to move the company’s registered office to their business address, they should also submit to the registrar of companies a copy confirming the change of registered office (if this has not already been filed). In February 2014, Companies House issued guidance answering frequently asked questions about insolvency filings at Companies House (most recently updated on 10 March 2022). The guidance contains a list of the...

Bourne (as liquidator of MM Apartment Letting Ltd) and another company v Manukyan and another [2024] EWHC 832 (Ch) What are the practical implications of this case? The judgment acts as a helpful illustration of the principles the court will apply and consistently enforce in situations of this nature where numerous unexplained transfers have been made from a company’s bank account ahead of its liquidation, and the sole director fails to provide an adequate justification. What was the background? The applicant liquidator sought relief against Mr Manuk Manukyan, the sole director of MM Apartment Letting Ltd (the ‘Company’), under IA 1986, ss 212, 238 or 239 in respect of: a dividend declared and paid in June 2018 after the deemed commencement of the winding up petition, where the payment was effected without a validation order; and various payments between 14 August 2017 and 13 April 2018 made by the Company out of its bank account before its winding up, for which no...

In this issue: International Reorganisations, restructuring and insolvency VAT Taxes management and litigation Anti-avoidance Energy and environment Key developments Employment taxes Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information International UK government announces mandatory application of the foreign permanent establishment exemption On 21 May 2026, the government released a policy paper outlining reforms to the taxation of UK-resident companies operating partly through foreign permanent establishments (PEs), making the foreign PE exemption compulsory for most businesses for accounting periods starting on or after 1 January 2027. For UK-resident companies with foreign PEs involved in activities relating to the exploration or exploitation of oil and gas, the measure will take effect from 1 September 2026. This is achieved by deeming those companies’ accounting periods to end on 31 August 2026, with the new rules applying from the next day. The policy paper indicates the...

In this issue: Trusts Court of Protection UK taxes for Private Client HMRC Manuals updates Tax avoidance, evasion and non-compliance Budgets and Finance Bills Insolvency—Private Client International Question of the week Additional Private Client updates this week Daily and weekly news alerts LexTalk®Private Client: a Lexis®PSL community New and updated content Dates for your diary Trackers Latest Q&As Useful information Trusts FTT finds acquisition of property gave rise to a resulting trust (Raveendran v Revenue and Customs Commissioners) The FTT examined an appeal against a discovery assessment arising from the disposal of a property. The taxpayer had omitted the disposal from his return for the relevant year, even though the asset was transferred to his sister-in-law. He had bought the property, in substance, for his brother’s benefit (the brother carried on business from the premises), but the brother’s bankruptcy meant he could not obtain borrowing to...

Capital reduction demergers Why a company may undertake a demerger, and the alternative ways such a split can be structured, are explained in Practice Notes: Demergers—an introduction to the tax issues and Demergers—an introduction for corporate lawyers. More detailed Practice Notes examine the tax implications associated with the main demerger routes, namely: statutory (or dividend) demergers, whether direct or indirect—see Practice Note: Statutory demergers liquidation demergers—see Practice Note: Liquidation demergers capital reduction demergers—the focus of this Practice Note In a capital reduction demerger, the top company of the target group reduces its capital; in consideration, the demerged business is moved to a new holding company, which then issues shares to the shareholders. Unlike a statutory demerger, a capital reduction demerger does not benefit from the specific tax reliefs available for exempt distributions. Even so, it can be implemented so that it does not give rise to tax charges—on income or on capital—for the shareholders or for any of...

What is a demerger? A demerger is a form of corporate organisation that separates businesses conducted by a company or group of companies, so that, following the demerger, the trading activities are run by independent management teams but remain, at least initially, under the control and ownership of all or any of the same shareholders as before. This approach is often undertaken in order to sharpen the management of discrete elements of the trading business, to ring-fence liabilities linked to particular trades, or to enhance shareholder value where the sum of the parts is considered greater than the wider conglomerate as a whole. There are several ways to carry out a demerger, including: an in specie distribution by way of a dividend of shares in the subsidiary being demerged to the parent company’s shareholders — typically the most straightforward route in practice a return of capital delivered as shares in the demerging subsidiary to the parent company’s shareholders a three‑cornered demerger, under which...

A recurring scenario is that payments are made on account of dividends during a financial year, with the expectation of declaring a dividend at the year end. If the company fails, there are then no distributable profits from which a dividend can be declared and the on‑account payments, often treated as loans, are recoverable. In private companies, directors/shareholders are frequently advised to adopt this approach as a tax‑saving measure... When can dividends be declared? Under Part 23 of the Companies Act 2006 (CA 2006), distributions may only be made to members out of profits available for that purpose. A company’s profits available for distribution are its accumulated, realised profits, so far as not previously applied by distribution or capitalisation, less its accumulated, realised losses, so far as not previously written off in a reduction or reorganisation of capital... The amount of profits available for distribution is determined by reference to the company’s last annual accounts, subject to two exceptions: where the distribution would breach...

When one company advances funds to another, the contractual provisions govern any restriction on repaying the loan before the ten-year period first contemplated. Should the lending company enter liquidation or administration, that circumstance, by itself, does not alter the contract’s terms. The office-holding insolvency practitioner should nevertheless review the agreement to determine whether it permits earlier repayment, or repayment on alternative terms, if the lending company goes into liquidation or administration. Although that may appear improbable, it remains possible, and the officeholder ought to explore every avenue to secure accelerated repayment of the borrowing. Absent an express clause to the contrary, the insolvency of the lender does not, of itself, accelerate the debt, and timing remains governed by the bargain. It would seem that the office-holding insolvency practitioner holds an appointment that must remain open for at least ten years before the loan can be discharged and a dividend distributed to creditors...