Click here to learn more about our revolutionary app or download directly from one of the sources below.
The purpose of a hive-down is to preserve the value of a failing company by transferring the valuable parts of the business to a subsidiary. The shares in the subsidiary or the assets are then sold off to a third party.
Crucially, as a company and its business are separate, debts of the company won’t be transferred to the new subsidiary.
A similar arrangement whereby a business is transferred to a parent company can be known as a ‘hive-up’.
HMRC is a non-ministerial Government body that collects money in the form of various taxes that pay for the UK’s public services and (it says on its website) helps families and individuals with targeted financial support.
HMRC are responsible for safeguarding the flow of money to the Exchequer through tax collection, compliance and enforcement activities; it administers Statutory Payments such as statutory sick pay and statutory maternity pay; it also facilitates legitimate international trade and protects the UK’s fiscal, economic, social and physical security before and at the border. It also collects UK trade statistics.
In an insolvency, HMRC is a secondary preferential creditor in respect of unpaid VAT, PAYE, NIC and CIS, jumping ahead of both floating charge and unsecured creditors when distributions are made following Liquidation. The effect of this is that HMRC will receive funds that would otherwise have been shared amongst unsecured and floating charge creditors.
The Liquidator will realise an insolvent company’s assets, turning them into cash which gets distributed to creditors who are paid according to a rank set out in the Insolvency Act 1986. On this scale, HMRC gets paid after the fees and expenses of the Liquidator, the holders of fixed charges and preferential creditors (such as employees for some of the unpaid salary or wages owed to them), but before floating charge holders and unsecured creditors.
[See ‘Preferential Creditors’, ‘Fixed Charges’, ‘Floating Charges’, ‘Insolvency Act’,
‘CIS’, ‘VAT’, ‘PAYE’, ‘NIC’ and ‘Unsecured Creditors’.]
