Members’ Voluntary Liquidation – What is it?
A solvent liquidation, or members’ voluntary liquidation (“MVL”), enables the shareholders to put a solvent company into liquidation.
MVLs can be used:
- to secure an orderly winding up of a company
- by shareholders wishing to unlock their capital
- to close down a subsidiary, within a group of companies, which has outlived it’s usefulness
- as part of a company’s restructuring for the purpose of the sale of part of the business
The MVL is under the direction of the shareholders who appoint a liquidator.
Declaration of Insolvency
The MVL procedure requires a Declaration of Solvency to be sworn, which states the directors have conducted a full enquiry of the company’s affairs and are of the opinion that it is able to repay it’s debts, with interest, within a 12 month period.
The liquidator is appointed at a General Meeting of the company, if approved by 75% of shareholders votes. The liquidator realises the company assets, settles any creditor claims and distributes the remaining assets to shareholders. Assets may be transferred in specie to members.
What are the tax benefits of an MVL?
Companies with assets in excess of £25,000 and which are no longer required must be wound up as a Members’ Voluntary Liquidation. This will enable shareholders to receive any distribution to be treated by HMRC as a capital distribution rather than a dividend, meaning that Capital Gains Tax would apply rather than Income Tax.
Furthermore, when distributing the assets of the company via a solvent or Members’ Voluntary Liquidation, the shareholders may be entitled to Business Asset Disposal Relief on the distribution (subject to certain conditions and limits) thereby reducing their tax liability even further, and which at the time of writing is just 10%.
What does an MVL cost?
Our fees are competitive and transparent, and unlike some firms, there are no unexpected hidden charges. Our fees and disbursements are set out clearly from the outset, so if you would like a tailored no obligation quote for your company, please contact one of our Insolvency Practitioners who will be happy to assist
What do I do next if I want to find out more or instruct mfw to wind up my company?
We appreciate winding up a company that you have invested so much time and effort into can be a worrying time, but we are able to help you every step of the way. For more information please either email us on firstname.lastname@example.org or call us on 01795 433655.
*Full details of criteria available on request.
Read our MVL Reminder blog.