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HMRC internal manual

Offshore Funds Manual

Particular arrangements: limited life companies: Company liquidations

An investor may have invested in a company or other arrangement which subsequently goes into liquidation, at which point the investor might reasonably expect to realise their investment at net asset value. However, if a company or other arrangement is outside the definition of an offshore fund before it goes into liquidation, then being in liquidation will not by itself bring that company or arrangement into the definition of an offshore fund. This also applies in the case of self-managed wind downs with the subsequent appointment of a liquidator to complete the liquidation.

This treatment would also extend to the purchase of shares in a company after it has entered a self-managed wind down or liquidation. This may not be the case, though, for wind downs and liquidations that are intentionally extended or contrived.

Some overseas companies can be liquidated or reconstructed at any time. If there is a decision to do so, at the point of the approval of the reconstruction or liquidation the investors may obtain net asset value. However, the relevant point is whether a reasonable investor can expect the company to be liquidated or reconstructed in order to deliver net asset value. It is necessary to consider the reasonable investor’s expectation to realise their investment either entirely or almost entirely by reference to net asset value (or by reference to an index) when the company was established (or when there was a change in the investor’s rights).