A solvent liquidation, or members’ voluntary liquidation (“MVL”), enables the shareholders to put a solvent company into liquidation. MVL’s 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.
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.
Members’ Voluntary Liquidations can often be a tax effective way for shareholders to unlock their capital, as often Entrepreneurs’ Relief is available, which can result in significant tax savings.
Read our MVL Reminder blog.
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