Negative reserves

I have a small private company client with an issued share capital of 25 000 £1 shares and a capital redemption reserve (CRR) of £100 000 going back to a buy-back of shares some years ago.

The company also has negative distributable reserves at present which prevents it paying dividends.

The shareholders would like to significantly reduce their paid-up share capital to just 100 £1 shares using the Companies Act 2006 provisions involving a special resolution and a solvency statement.

They envisage creating distributable reserves from this process that would turn the existing negative reserves into a positive figure which could then be used to pay out dividends over a period of time as cashflow permits.

What they would really like to do given the numbers involved is to reduce the CRR to nil as part of the capital...