What is a distribution in specie?

“In specie” is a Latin phrase meaning “in its actual form.” A distribution in specie is when a company gives an asset to its shareholders in its existing form rather than selling that asset, turning it into cash, and handing over the money instead.

In other words: instead of the asset being sold (or, in a liquidation, “realised”) and the proceeds shared out, the asset itself is transferred directly to the shareholder in its current form.

Normally, when a company is wound up, the liquidator’s job is to turn everything the company owns into cash by selling its assets. This cash is then distributed to the shareholders. A distribution in specie is the alternative: rather than being sold, an asset is passed to a shareholder as it is.

The kinds of asset that might be distributed in specie include:

• Property – for example, where a shareholder would rather keep a property the company owns than see it sold
• Shares or investments – an investment holding transferred to the shareholder intact
• Other assets – such as equipment, vehicles, or intellectual property
• A loan or debt owed to the company – which can be distributed to the shareholder who owes it which effectively cancels it out (more on this below)

There are a few reasons a company or its liquidator might take this route:

• The shareholder wants to keep the asset rather than have it sold to someone else
• Selling would be slow, costly, or impractical
• It’s simply cleaner and more straightforward than a sale followed by a cash distribution

In a Members’ Voluntary Liquidation, the liquidator can distribute assets to shareholders in specie as part of winding the company up, so if there’s an asset a shareholder would rather keep, it doesn’t necessarily have to be sold.

Distribution in specie can also work where there is an outstanding loan owed to the company by one of the shareholders. During an MVL, this loan can be distributed back to you in specie. As you can’t owe money to yourself, it simply cancels out, leaving the cash properly yours as a capital distribution.

In a liquidation, a distribution in specie is treated as a capital distribution, just like a cash one, it forms part of your Capital Gains Tax position on the winding up. Depending on the value of the asset you receive, it may qualify for Business Asset Disposal Relief. Transferring certain assets, property in particular, can carry its own tax consequences, so if a distribution in specie of a physical asset is on the cards, it’s worth talking it through with your accountant first.

If your company’s straightforward and an MVL looks like the right route, you can get a fixed-fee quote in a couple of minutes.