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05 June 2012
Issue: 4356 / Categories: Forum & Feedback
Is a reduction of a company’s share capital using a director’s statement of solvency a tax-efficient way of extracting shareholder/owner-managed funds from a business?

I have seen representations on some tax lecturer presentations that share capital of private companies can be reduced by using a director’s statement of solvency.

This apparently is a valuable and flexible way of extracting shareholder/owner-managed funds. I have two questions and should be grateful for advice.

First I am concerned as to any limits of capital repaid in this manner. Should I consider establishing companies with more share capital at the outset as opposed to loan accounts to allow for this flexibility?

Higher share capital at the outset would also make subscription share loss claims possible if all did not work out well.

Second are there any prohibitive costs involved?

I will be very interested to learn readers’ views.

Query 18 001 – Adept

Reply from Pete Miller The Miller Partnership

The first part of the question is partly a matter of...

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