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Exiting via a Solvent Liquidation - news article image

Exiting via a Solvent Liquidation

8 Jun 2022

2 minute read

Unlocking opportunity from uncertainty 

My colleague Charlie, in his recent article, discussed the fact that exit-planning has come to the fore for many business owners as a result of Covid. Numerous of these sales will have been facilitated through an asset sale rather than a share sale, in which case the monies will need to be withdrawn from the company and distributed to the shareholders. 

During the last couple of years, Shaw Gibbs have facilitated a large number of solvent liquidations, as a wave of people decided it was the right time to either retire or sell their business, no longer wanting to work in their industry under recent conditions, or after re-evaluating what was important to them, and addressing their work-life balance. 

The common misconception that liquidation is always a negative term is incorrect. A solvent liquidation is appropriate where all liabilities are paid in full, in the event of cash reserves over £25,000 remaining, so that there is a return to shareholders, and is a very useful tool for exiting a business. 

With careful planning, and with accountants and insolvency practitioners working closely, shareholders can benefit from solvent liquidations, as they can be used as a tool for tax planning. Shareholders will ordinarily pay a lower rate of personal tax when receiving monies from the Company, and under certain conditions they may be able to claim Business Asset Disposal Relief (formerly Entrepreneurs’ Relief). 

Working alongside our Corporate Finance team and Tax Team, the Insolvency and Advisory team at Shaw Gibbs can help plan and structure business exits. These include property development ventures after sale completion of the development, medical professionals seeking retirement, or distributing funds in a company to beneficiaries of an estate. It is always best to seek advice early. 

Once you have a plan in place to release your assets from your business, it is advisable to speak to a member of our Financial Planning team who can help you plan for a long and happy retirement.

Exiting via a Solvent Liquidation - news article image

Author:

Karyn Jones

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