The Bona Vacantia Division of the Treasury Solicitor’s Department have with effect from 14th October 2011 withdrawn in full guidelines BVC17 (‘Guidelines’) and its concession from the Bona Vacantia website. We have compiled a list of frequently asked questions to help you understand the reasons behind this decision.
NOTE: These FAQs only relate to the Treasury Solicitor’s position in respect of share capital distributions. They should not be taken as endorsing any particular course of action in winding up a company and dealing with its share capital or as providing legal advice. You should take your own independent professional advice.
1. Why remove the guidelines BVC17 ?
In the light of recent changes in the law following the introduction of the Companies Act 2006, it is now easier to reduce share capital and to restore a company to the register. In the light of this, the Treasury Solicitor Department’s concession (‘TSC’) in this area is less relevant. Following a review the Bona Vacantia Division has therefore taken the decision to remove the Guidelines together with the TSC..
2. Do I need to contact TSol about a proposed share capital distribution of any amount?
No. There is no need to contact the Bona Vacantia Division regarding distributions of any amount made prior to dissolution as we will not attempt to recover them.
3. Does this mean that there is no Bona vacantia interest?
No. The right to recall unauthorised share capital distributions that the company had prior to dissolution would still vest in the Crown. However, the Treasury Solicitor will not now attempt to recover any distributions made prior to dissolution.
4. Does the removal of the TSC mean intervention is now more likely even for distributions less than £4000?
No. The Treasury Solicitor will not attempt to recover any unauthorised distributions of share capital of any amount made prior to dissolution.
5. What happens if the company has been dissolved prior to making any distribution?
Before a company is dissolved, members should ensure that assets owned by the company are dealt with and transferred out of the company's ownership. If this is not done, you cannot make any distributions or deal with any of the company assets after dissolution. Assets owned by the company immediately at dissolution will pass into the ownership of the Crown as bona vacantia. You cannot, therefore, make any distributions or deal with any of the company assets if the company has been dissolved.
6. What effect does this have on HMRC’s ESC C16?
The TSC and HMRC’s ESC C16 concession have always been completely separate. The TSC dealt with the potential bona vacantia interest in the former company’s right to recall unauthorised share capital distributions. HMRC’s ESC C16 concession relates to the tax treatment of distributions made in the course of dissolving a company where there is no formal winding up. The removal of our guidelines and the TSC will have no effect on the ESC C16 or any other law or regulation on share capital distribution. You must seek your own professional advice as to the position.
7. I understand that the ESC C16 is to be removed and replaced with a statutory provision.
That is correct. In the recent decision of R v HM Commissioners of Inland Revenue ex p Wilkinson [2005] UKHL 30, the House of Lords’ clarified the scope of HMRC’s administrative discretion to make concessions that depart from the strict statutory position. In the light of that decision, HMRC is reviewing each of its published concessions. Where an existing concession exceeds the scope of that discretion, where it is appropriate to do so, its effect will be maintained by putting it onto a legislative basis. A consultation document, which included a draft statutory ESC C16 was published on 13 December 2010. For more details, you will need to contact HMRC: Andrea Pierce 020 7147 2591.