Handling Residual Assets in Liquidation

The Challenge of Residual Assets

Voluntary liquidation is designed to distribute remaining assets and dissolve the entity. But in many cases, illiquid or contingent assets remain that cannot be easily distributed on a pro rata basis. These may include litigation claims, early-stage investments, or digital assets subject to restrictions.

Options for Holding Residual Assets

To avoid delaying the liquidation indefinitely, directors may transfer residual assets into a suitable post-liquidation vehicle:

• STAR Trusts
  Purpose trusts with no beneficiaries, often used to hold illiquid assets until they can be realised.
• Special Purpose Vehicles (SPVs)
  Separate companies set up to hold and manage specific assets under agreed governance terms.
• Foundation Companies
  Flexible Cayman vehicles suitable for holding assets where long-term oversight or conflict management is needed.

Key Considerations When Selecting a Vehicle

• Who will control the vehicle after liquidation?
• What distribution mechanism will apply?
• Are there tax, fiduciary, or governance considerations?
• What documentation is needed to support the transfer of assets?

Final Thoughts

Residual assets can significantly delay a liquidation if not addressed early. Transferring them into a credible and properly structured holding vehicle allows the wind-down to proceed, while maintaining flexibility and oversight over future recoveries.