Cryptocurrencies now recognised in Members Voluntary Liquidations

Published on September 7, 2021 by Gareth Hunt - Insolvency Practitioner

It is now widely accepted that cryptocurrencies fall into the definition of “property” under The Insolvency Act 1986 and as such Insolvency Practitioners, (“IPs”) have a duty to realise its value. It is therefore becoming increasingly likely that IPs will encounter these either as an asset to be realised or an asset to be distributed in a Members Voluntary Liquidation, (“MVL”).

The rise of Cryptocurrencies over the past few years has seen its perception move from one of the “dark Web” to that of a widely accepted and valid form of investment. An ever increasing number of multi-national companies such as Amazon, Paypal etc, are now accepting cryptocurrencies as payments, and the Bank of England is considering Central Bank Digital Currencies (“CBDC”).

Whilst the days of solely dealing with traditional tangible assets may not yet be in the past it is apparent that IPs need to be adaptable to new technology and terminologies and the new processes that these will bring and view these with an open perspective and adapt to enable these to be a beneficial part of an estate to be realised and distributed in an MVL.

As with any other Company asset in an MVL cryptocurrency should be disclosed in the Declaration of Solvency, however this may give rise to a potential problem in valuing any such assets. As there is no centralised interbank rate there is no standard for what a conversion rate should be. Additionally given the large fluctuations in rates seen over the last few years there is potential for criticism arising on the IP if they fail to secure a high exchange rate.

One way to reduce this risk could be to ensure that a variety of rates and exchanges are considered together with obtaining expert advice on the exchange. Alternatively the IP could look to place the currency in an auction, wherein the highest bid becomes the value rather than an exchange rate. It is unlikely that the sole asset in the MVL will be cryptocurrency and it may be prudent to review the Company records and liaise with the Director/Shareholder/accountant to ensure that the correct value is provided for in the Statement of Solvency.

The IP should also look to identify and locate the private key. Consideration should then be given to transferring the cryptocurrency to their own secure wallet on behalf of the estate or one operated by an agent.

New FCA legislation provides that holding cryptocurrency on behalf of someone else must be done by an approved agent, who can secure the asset offline and ensure the asset is correctly insured.

The IP should also work with all parties to decide the most appropriate course of action as to the distribution of the cryptocurrency, either remaining in its current form or converting to conventional currency. Again the IP should take the above steps to ensure that the maximum value is received and it is imperative that all parties are aware of the tax implications.

At all stages of considering, an MVL in particular where part of an estate comprises of Cryptocurrency,  the Directors and Shareholders should take appropriate tax advice to ensure that their hard earned investments are not subject to higher tax rates than may be necessary. It is especially important to avoid some of the common misconceptions on the treatment of cryptocurrency by HMRC.

RPG’s specialist team of Insolvency Practitioners has expertise in dealing with all aspects of Insolvency and Business Recovery. Contact info@rpg.co.uk   for any advice.  Daniel Prais, Director at RPG specialises in the tax treatment of cryptocurrencies and you can read his latest article here. https://rpg.co.uk/cryptocurrency-the-tax-perspective/.

Gareth, who joined RPG in March 2021, is a member of the Insolvency Practitioners Association. Gareth has gained significant experience dealing with corporate and personal insolvency together with advisory work including liquidations, CVA’s and administrations from a wide range of industry. He also assists individuals on bankruptcy and IVA’s. Email: ghunt@rpg.co.uk

View all posts by Gareth Hunt - Insolvency Practitioner

We have received an excellent service from the team at RPG for well over 20 years. We particularly appreciate RPG's real interest in our company and suggestions for improvements. The service RPG provides goes well beyond what we could expect.  The attention to detail and the prompt, professional service the team provides means that we are reassured that should we require urgent or unusual advice, the team will provide it. We would have no hesitation in recommending RPG.

Margaret Peasegood

Executive Chairman - SheffProp

I would like to thank RPG for your unbelievable help, assistance and friendship for over 40 years. Nothing has ever been too much trouble. Words alone are insufficient, and I think that the same would apply to my former colleagues and my family who have also come to rely on your advice and guidance.

Neville Johnson

Founder - Neville Johnson Offices

We have worked with RPG for many years, for good reason. They are not only extremely knowledge but they really take the time to get to know you as customers and also as people. This really makes a difference, as whilst it is of course important that you receive great service, which we do, it’s also essential to work with professionals who you can really trust and who go out of their way to know your business as well as you do, giving ultimate comfort that you are all striving towards the same goals. I cannot recommend them highly enough.

Jennie Johnson MBE

Kids Allowed

“RPG have always been our first point of call for advice on accounting, tax and financial regulatory matters and indeed have become an additional sounding board for both myself and my colleagues on strategic matters. The consistently high quality and timely advice they provide is very important to us.”

Gareth Rowe

Chief Financial Officer - ProofID

“As a family business we have been using Royce Peeling Green as our accountants for over 25 years. We have always been impressed with their expertise and depth of knowledge in all financial areas required to help run our business. There is an obvious understanding and trust between the two companies which leads to proactive approach to guide us with short and long-term financial planning. We have found everyone at Royce Peeling Green to be very approachable providing us with the reassurance that they will always provide a professional response in a timely manner.”

David Harrabin

Managing Director - Manchester Slate Ltd

RPG have now acted for our various companies for over 15 years. Their advice and commercial attitude in dealing with Tax, Audit and general businesses matters has always been of high quality and queries dealt with promptly. The team at RPG are experts in their field, they understand the SME market place well. They have been involved in all our corporate transactions, from setting up of businesses, ongoing support of our management teams through to being part of the team that negotiated the successful sale of a group company.

Jonathan Hamburger

Genesis Group International

We have received a first rate service from RPG over many years. We appreciate their attention to detail and the timely, professional and pro-active advice they provide. We would have no hesitation in recommending the team at RPG.

Stephen Rector

Managing Director – Ribble Packaging Limited