Owner managed business - case study

Directors/ Shareholders to retire and extract the Company’s cash in a tax-efficient way

We were engaged in respect of the liquidation of a Software Development company. The directors had traded the Company successfully for over 20 years but were approaching retirement and wanted to wind up the Company and extract the cash in a tax-efficient manner.
It was proposed that the balance sheet would comprise assets of cash at bank of around £580,000.
We deal with a high number of Owner Managed Business liquidations yearly, with simple balance sheets comprising generally of cash at bank of between £50,000 and £1,000,000, with minimal creditors.

Initially, due diligence was undertaken alongside the directors, to ensure that there were no outstanding matters to be addressed that could potentially impact the duration and cost of the solvent liquidation.
The due diligence undertaken identified two issues; a sale agreement entered into in respect of the Company’s subsidiary, which contained warranties and restrictive covenants; and an open pension scheme in the name of the Company.
It was decided that the directors would deal with these issues prior to our appointment, under our guidance. This would delay the start of the liquidation but would be a cost-effective exercise, by keeping our involvement to a minimum.

The Company was able to enter liquidation once the above issues had been resolved. Due to them being resolved prior to our appointment, this did not cause any delays to the completion of the liquidation.
No further issues arose following our appointment and a large cash distribution was declared to the shareholder at the end of the liquidation, which occurred within 12 months following our appointment.

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