Deciphering Crypto Assets in Solvent Liquidation

A members’ voluntary liquidation is used to bring a solvent company, one that is able to pay all of its remaining liabilities, to an end and will often provide a tax efficient route for shareholders to extract the remaining assets.

This process has been used traditionally to deal with residual cash remaining in a company’s bank account, however, it can also be used to distribute other assets such as property or debts. Over the past 12 months we have encountered a number of situations where the main assets of the company that we are working with are crypto assets, which is not surprising given the increasing popularity of their dealing and the volatility of their value.

Whilst the holding of such assets does not in itself make our task as liquidator any more difficult, there are some additional planning requirements that need to be considered both from a practical perspective, ensuring for example that any “wallets” can be accessed and dealt with if necessary during the liquidation process, and from a taxation perspective, making sure adequate tax considerations have been undertaken.

Depending on the type of crypto asset held and whether it is an income generating asset or not, could mean that its treatment for tax is different. It is, therefore, essential for appropriate tax advice to be taken ahead of any planned liquidation to establish when any gains or losses that will be achieved should be crystalised, as this will be a critical factor in the planned liquidation.

Given our experience dealing with many types of assets in solvent liquidation scenarios, including crypto assets, and with distributions paid to shareholders of in excess of £30m in the last two years, we are well placed to advise on this process with, where necessary, the input of our tax team.

Posted in Insolvency, News, Newswire.