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No company distribution arose on transfer of goodwill to LLP

By Mark McLaughlin, December 2023

The reputation and relationships of a company’s director-shareholders with individuals requiring financial advice were not assets of the company capable of transfer, so no distribution arose on the transfer of those assets to a limited liability partnership.   

A financial advisory company (SIFA) was incorporated in June 1999, and the second appellant (RAC) was appointed a director. The first appellant (MAS) became a director of SIFA on 1 January 2006 and a shareholder on 1 October 2006. A limited liability partnership (LLP) (SWM) was founded on 2 June 2011, with five members including SIFA and the appellants (together with their wives).  

Pursuant to a business transfer agreement dated 1 July 2012, the business of SIFA was transferred to SWM, including goodwill, trade name and customer list. RAC’s capital account in SWM was credited with £1,179,000 and MAS’s capital account was credited with £1,017,000.

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