About Members’ Voluntary Liquidation
Members’ Voluntary Liquidation is a process by which a Solvent Company (that is a Company that can afford to pay all of its debts) can be closed down in a controlled, efficient and stress free manner whilst also maximising tax benefits to its shareholders.
In most cases, Directors look to place their Company into Members’ Voluntary Liquidation when there is significant value in its assets but there is either no desire to sell it as a going concern or no real market for it. In these circumstances, a Members’ Voluntary Liquidation allows shareholders to extract the value they have worked so hard to put into the Company.
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The MVL Process
The key qualifying criterion for placing a Company into Member’s Voluntary Liquidation is that the Directors must be satisfied that the Company will be able to pay its debts in full within 12 months of the MVL commencing. Provided you are happy your Company can meet this criterion, the MVL process which we will complete on your behalf is then:
1. Hold a Board Meeting
At which the Directors agree to seek a resolution from Shareholders to place the Company into MVL and to swear a Declaration of Solvency.
2. Prepare and Swear a Declaration of Solvency
This includes a statement of the Company’s assets and liabilities and a sworn statement from the majority of the Directors that the Company’s will be able to pay all of its debts within 12 months.
3. Pass the Shareholders’ Resolutions
At which point the Company is formally placed into Members’ Voluntary Liquidation, the Liquidator is appointed and any additional resolutions are passed such as to all assets to be distributed to shareholders without first being sold to generate cash. This is typically done by written resolution but can also be done a shareholders’ meeting.
4. The Liquidator Completes the MVL
Once the Company is in Members’ Voluntary Liquidation, we will realise any assets that need to be sold and will pay off any remaining Company debts. When this has been done, we will then distribute any remaining funds and assets to shareholders in accordance with their shareholding and the resolutions passed by the shareholders (less our agreed fee of course).
Distributions to shareholders can be made as quickly as 4 weeks from the date of the shareholders’ meeting subject to obtaining the necessary tax clearances and indemnities.
5. We Close the Case
When all of the distributions have been completed, we will issue a final report. The Company is formally dissolved at Companies House 3 months after the final report has been issued.
The Benefits of MVL in Detail
MVL has the following key benefits:
- Payments to shareholders as dividends are normally treated as income taxed at 7.5% in the basic rate band, 32.5% in the higher rate band and 38.1% if over £150,000.
- However, distributions in an MVL are treated as distributions of capital and as such attract tax at 10% in your basic rate band and 20% for those in the higher rate band. You can also use your annual tax free capital gains tax allowance.
- As distributions in an MVL are treated as capital you may be eligible for Entrepreneur’s Relief. This reduces the tax payable to 10% on all distributions up to £10 million. This represents a massive tax saving for shareholders.
- The technical process of winding up the Company’s affairs and removing it from the register is completed by an experienced professional thus freeing you from the responsibility of meeting the stringent dissolution criteria.
- The whole process can usually be completed within a few months with payments to shareholders made as soon as funds allow. We can also distribute physical assets back to shareholders should they wish rather than having to sell all of the assets.
It should be noted that in order to qualify for Entrepreneur’s Relief you will not be able to trade in the same business for a period of 2 years after obtaining the relief.
As you can see, there are a number of excellent benefits to placing your Company into Members’ Voluntary Liquidation. Our service is designed to help you make the most of these benefits whilst also minimising the stress and work required by you.
We will always be upfront with you about the likely timeframe in which we will be able to distribute funds to the shareholders and where possible will agree a fixed fee so that you know the financial return to expect from the outset. We are also able to provide detailed advice on applying for entrepreneur’s relief and on generally minimising your tax payable through our experienced in-house tax department.
Call Us Free on 0800 084 3406