Readers’ forum: Side saddle

I act for a trading company (X Ltd) which has made a large profit in one year. This is unlikely to be repeated in future. There are now surplus funds in X Ltd’s bank account of about £800 000. The two directors/shareholders who both have other full-time employment are keen to extract some of this money from the present trading company. This is because there is a potential future risk to the funds due to the nature of activities carried out by X Ltd. They would like to transfer the funds to another corporate vehicle for the purpose of residential property investment.

One possibility being considered is the formation of a holding company (Y Ltd) with a paper-for-paper swap to facilitate payment of dividends from X Ltd to Y Ltd. Those funds would then be ring-fenced from the risk in...