VCM15080 - Investee companies: Effect of liquidation

ICTA/S293 (5) & (6); ITA/S182 (3) & (4); ITA/S312; FA00/SCH15/PARA24

If a resolution is passed, or an order is made, for the winding up of the company (or any other act is done for the same purpose), or if the company is dissolved without winding up, the company will fail to satisfy at least one of the conditions which apply to it.

However, this failure will be disregarded where the winding up or dissolution is for genuine commercial reasons, and not part of a scheme or arrangement for avoiding tax.

The usual “genuine commercial reason” for winding up a company will be that it is insolvent or is likely to become insolvent. The sooner a company goes into liquidation after ceasing to trade because of insolvency, the sooner it can be established that relief will not be withdrawn from its investors.