CTM36125 - Particular topics: company winding up etc.: beneficial ownership of shares

When winding-up commences, a company loses its beneficial interest in its assets. The company may retain legal title and possession of the assets but it loses beneficial ownership of the assets. This includes shares owned in other companies (see Ayerst v C and K (Construction) Ltd 50TC651). The effect is that, where the provisions of the Acts depend on such shareholdings, they can no longer be taken into account when the company owning the shares commences winding-up.

Elections (in particular, elections under ICTA88/S247 (1) for distributions made on or before 5 April 1999 and under ICTA88/S247 (4)) for payments of interest or charges paid on or before 11 May 2001, see CTM80085and CTM80915) are invalidated when the beneficial ownership of shares on which the election depends is forfeited as a result of winding-up. The commencement of winding-up by one company in a consortium of companies may invalidate an election by another company in the consortium.

In contrast, a company in receivership does retain beneficial ownership of its assets.

Example

The ordinary share capital in Company B is owned by Company N 60%, Company L 20% and Company D 20%.

If Company N commences winding-up, no consortium elections are valid, as 75% of the share capital is no longer beneficially owned by the companies.

If only Company L commences winding-up, its election with Company B is invalidated. But, elections by Company N and Company D with Company B are still valid.

As regards chargeable gains, TCGA92/S170 (11) (CG40400 onwards) applies and TCGA92/S170 (see CG45000 onwards) continue to cover the transfer of assets by the liquidator to other group members.