Company Share buy back /Capital reduction help please

[IANL]

Hi There

Has anyone done a capital reduction or share buy back.

I am looking to reduce the issued and paid up share capital of £ 50k down to £ 1k.

Has anyone now the best way to do this. The balance sheet of the business is now circa £ 30k.

I am happy to realise a capital loss (which is obvious) Just need to know the easiest way of doing this.

I have seen this
"... One alternative (that has been used by large UK listed companies), is to convert share capital into debt. Existing shares are cancelled and replaced with new shares (fewer, or with a lower par value) and bonds, the latter typically redeemable at the option of the holder. This allows shareholders to take the return of capital as a capital gain, and time it to their advantage."

Any advice from the experts or experienced would be great.

 

[Lancelot]

You can do a reorganisation to replace the existing shares with new shares and bonds and even cash but there may be capital tax implications here.

Who are the shareholders? What was the cost of the shares at purchase?

Ideally discuss these outside the forum with an accountant so that he/she can work out the best way to do it.

 

[IANL]

You can do a reorganisation to replace the existing shares with new shares and bonds and even cash but there may be capital tax implications here.

Who are the shareholders? What was the cost of the shares at purchase?

Ideally discuss these outside the forum with an accountant so that he/she can work out the best way to do it.

Thank you Lancelot

I am the sole shareholder and director. I have discussed in principle with my accountant and he only said that I could do a a capital reduction but any distribution would be taxed (dividend). He has not mentioned a tax neutral effect of releasing money tied up in shares. This company sold it's business two years ago and has now been paid and is basically not trading anymore.

 

[Lancelot]

Apologies, but without seeing the books it is hard to give any further advice. However, as the company is not trading, wouldn't it be easier to liquidate it?

 

[IANL]

The cost of liquidation would be about £ 5k, not worth spending also I don't want to close the company yet as it is still owed money from one of my other companies.

In essence I want to to a shre buy back and was looking for info surrounding this area.

I understand you cannot give specofic advice without seeing the full picture. Just want to know the correct forms and process. I can handle the paperwork side.

Thanks anyway.

 

[Paul Murakami]

From a legal perspective, the best way is probably the so-called 'solvency statement' procedure. This involves the directors giving a declaration that the company will be able to pay its debts over the next 12 months. It's a pretty straightforward procedure, and your lawyers should be able to handle this for you for a relatively modest fee.

 

[IANL]

From a legal perspective, the best way is probably the so-called 'solvency statement' procedure. This involves the directors giving a declaration that the company will be able to pay its debts over the next 12 months. It's a pretty straightforward procedure, and your lawyers should be able to handle this for you for a relatively modest fee.

Hi Paul

Thanks for that. I am aware (although do not have the detailed nature) of that process and this should not be too complicated. I wanted to know then how the excess capital is distributed other than by dividend. I