In the recent case of Re Watford Printers Limited (in Liquidation)  EWHC 329 (Ch), the High Court has given guidance on distributing a surplus in an MVL.
In this case, on incorporation the company had adopted the general rules of Industrial and Provident Societies, whereby individuals hold between £5 and £200 worth of £1 shares. The company later increased the maximum to £1,000, and some shareholders took the opportunity to acquire more shares.
In the ultimate liquidation, there was a surplus after distribution to creditors. The Liquidator considered that there were three options as to how the surplus could be distributed:
According to shares held.
Equally between all shareholders regardless of shareholding.
Return of capital for the shares and then equal distribution regardless of shareholding.
Section 107 Insolvency Act 1986 states that a surplus “shall (unless the articles otherwise provide) be distributed among the members according to their rights and interests in the company.” However some shareholders argued that this would be unfair and that an equal distribution should be made in order to achieve equality, as before the winding up they had all participated in the company equally, and received any (limited in this case) benefit from holding shares equally regardless of number.
The Liquidator applied for directions, and the Court held that the correct distribution was in accordance with the Act, on the basis that the position prior to liquidation did not have an effect on the position after liquidation. The only way to achieve this was for the articles of the company to deal with the position after liquidation, which they did not.
This case serves as an important reminder as to how Liquidators should deal with the distribution of a surplus in MVLs. To quote Lord Sumption in Bailey v Angove’s Pty Limited  UKSC Civ 47, “The statutory rules for the distribution of insolvent estates represent an important public policy designed to achieve a pro rata distribution of the company's estate between its creditors.”