Section 110 Reconstructions

Before starting a members’ voluntary liquidation, it is usual that all creditors will have been paid in full and the assets reduced to cash. However, there are legislative provisions that allow items to be distributed in kind, such as inter-company debts, assets or shares in associated companies.

A section 110 reconstruction allows an existing company to transfer its assets into a new company in return for shares (or shares and cash) and the shares in the new company are then distributed to the shareholders as a distribution in kind. This could allow the sale of a business as a going concern, but preserves a future income for the shareholders from the shares in the new trading entity. Assets can be transferred into more than one new company, and we often see a s110 reconstruction used to allow shareholders in the existing company divide assets and trade into new companies that meet retiral requirements or family goals.

Speak to us if you are a tax, business or legal adviser, or a shareholder, and a s110 reconstruction is something that might provide you, or your client, with the solution they require.

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