Q&As

If land, an asset of a company in member’s voluntary liquidation (MVL), which was due to be distributed in specie to the sole director or shareholder of the company in MVL, was in fact transferred directly to another company owned and controlled by that same director’s (rather than transferred into their sole name as shareholder of the company in MVL): Could this transfer be attacked at a later stage? And what steps should be taken now to rectify this transfer so that the transferee can take good title?

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Produced in partnership with Caroline Clark
Published on LexisPSL on 04/06/2018

The following Restructuring & Insolvency Q&A produced in partnership with Caroline Clark provides comprehensive and up to date legal information covering:

  • If land, an asset of a company in member’s voluntary liquidation (MVL), which was due to be distributed in specie to the sole director or shareholder of the company in MVL, was in fact transferred directly to another company owned and controlled by that same director’s (rather than transferred into their sole name as shareholder of the company in MVL): Could this transfer be attacked at a later stage? And what steps should be taken now to rectify this transfer so that the transferee can take good title?

Under section 110 of the Insolvency Act 1986 (IA 1986), with the appropriate sanction, the liquidator in a members' voluntary liquidation may sell or transfer the assets of the company to another company in consideration for shares or profits in the transferee company. The shares or profits in the transferee company would then be distributed to the shareholders of the transferor company in members' voluntary liquidation. Such a distribution in specie under IA 1986, s 110 is frequently used as part of a group reconstruction.

The appropriate sanction under IA 1986, s 110(3) is a special resolution of the shareholders of the transferor company, giving the liquidator the authority to carry out the transfer concerned. This authority could either be general or specific regarding a particular transaction or asset.

For the transfer of the property to be valid, the shareholders of the transferor company would therefore have

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