SOLVENT COMPANY CLOSURE

MEMBERS VOLUNTARY LIQUIDATION (MVL) – FOR SOLVENT COMPANIES LOOKING TO CLOSE

A Members Voluntary Liquidation (“MVL”) is a tax-efficient way of distributing the assets of a solvent company to the shareholders.

A MVL is the most common method for directors and shareholders to realise company assets, including physical assets such as buildings, motor vehicles, and plant & machinery as well as cash at bank.

The MVL process must be overseen by a licensed Insolvency Practitioner and should be implemented when a solvent company needs to be wound up.

Once all creditors and taxes have been paid the surplus is distributed to the shareholders. In certain circumstances physical assets can be distributed as an alternative to money to the shareholders. i.e vehicles or property.

REASONS TO USE A MEMBERS VOLUNTARY LIQUIDATION?

It is a tax efficient method of distributing company assets.

Entrepreneurs relief may be available on distributions.

It efficiently returns company value to shareholders.

It is an efficient retirement option for when there is no succession or sale of the business.

Shareholders can receive assets from the company in specie instead of cash (i.e. a Property or Vehicle).

REASONS NOT TO USE A MVL?

A MVL is not appropriate if the company is deemed to be insolvent (Not in a position to clear its debts in full)

Swearing the declaration of solvency knowing that the company is insolvent, is committing a criminal offence.

If the company is insolvent, then alternative solutions are available and it would be more beneficial to discuss with a member of our team, to make sure that you receive the best possible advice for you and your company.

MEMBERS VOLUNTARY LIQUIDATION – THE PROCESS

  • Director of the Limited company instructs a Licensed Insolvency Practitioner who will assist with the process.
  • Company provides all the relevant information and a date that the company is to be placed into liquidation is agreed (General meeting of members).
  • Prior to the general meeting of members a Declaration of Solvency is signed by the Directors in the presence of a solicitor, which states that the company will settle its liabilities and interest within a 12 month period from the date of liquidation.
  • At the general meeting of members the company goes into Liquidation and a Liquidator is appointed:- need 75% of shareholders to vote in favour of the Liquidation.
  • Appointment documents and declaration of Solvency are filed at Companies House, advertised in the London Gazette and all relevant parties are notified.
  • Following the Liquidator’s appointment the company bank account is closed with the funds being held in a client account held by the Liquidator.
  • Any remaining assets will be realised.
  • Once confirmation has been received that there are no company creditors or all creditors have been paid, an interim or final distribution will be made to the company shareholders.
  • Confirmation is received from HMRC that they have no matters outstanding.
  • If necessary a final distribution will be paid to the shareholders.
  • The Liquidator will prepare a final report, distribute to all members and file at Companies House, 3 months later the company will be dissolved at Companies House.

If you need any assistance or information regarding whether a MVL is right for you and your company then please speak to a member of our team on 0800 781 0014.

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