Background
BRI was contacted by the directors of a local successful real estate company (“the Company”), which had traded for more than 30 years. The Company was a family-run business that specialised in the rental market and had built a strong reputation in this sector. In early 2024, the directors made the decision to sell the Company’s remaining assets, with the intention of closing down the Company. With trading activity ceased and all obligations fulfilled, the Company held surplus funds which the directors wished to extract in the most tax-efficient way before formally closing the company.
Objectives
After consulting with their accountant, the directors met with BRI Business Recovery and Insolvency. During this meeting, they told us about the steps they had already taken in preparation, along with their intentions for closure. The main objectives were to bring the Company’s affairs to an orderly conclusion whilst ensuring all outstanding matters were dealt with. This would then enable the remaining funds to be distributed to the shareholders. A Members’ Voluntary Liquidation (“MVL”) was identified as the most appropriate route to achieve these objectives in a compliant manner. Whilst the directors were aware of the outline of the process, we were able to explain the process to them in further detail and advised how best to proceed in the most efficient way, whilst meeting any statutory requirements along the way.
Steps Leading up to the Appointment of BRI Business Recovery and Insolvency
Here at BRI, we understand that any insolvency process can be a confusing, daunting and even emotional process for directors. Despite an MVL being the closure of a solvent company, it is not always a process that they have been through before. This is why we try our best to put the directors at ease in any way we can. One of the ways we do this is by ensuring the directors have a main point of contact from start to finish.
Before the formal appointment, we worked together with the Company’s directors and accountants to ensure that all known liabilities had been settled whilst reviewing the financial position of the Company in order to accurately prepare the Declaration of Solvency. Once all preparations were finalised, the shareholders passed a resolution to place the company into an MVL.
What happens during an MVL following the appointment of an Insolvency Practitioner?
Shortly after our appointment as the insolvency practitioner, an initial monetary distribution was made to the shareholders whilst complying with statutory requirements. Contact was made with any relevant external parties, including HMRC, to be able to conclude the company’s affairs at the earliest possible opportunity.
Throughout the process, we ensured that regular updates were provided to the directors, which kept them fully informed and at ease. Being informed helps our clients remain confident in the MVL progression that was being made.
The outcome of the MVL
As a result of the forward planning of the directors prior to meeting us, the assistance from the Company’s accountant and our clear explanation about what was required for the process to run as smoothly as possible, the directors were confident from the very beginning on what was needed in order to complete the liquidation in the most efficient way possible. As a result, the liquidation of the Company was completed within four short months.
All outstanding matters were resolved, funds were distributed to shareholders, all statutory requirements had been met, and the directors had achieved their objectives.
Upon receiving the final closing report, the directors expressed their appreciation, stating:
“Thank you for this and for all your assistance during this process, which we appreciate greatly.”
Key points to take away about MVLs and Insolvency Practitioners
This case highlights how an MVL provides a clear and structured process for closing a solvent company, whether that be following a sale or cessation of trade.
There are multiple steps to be taken during all stages of the liquidation process. In this instance, we were able to reach the conclusion of the company’s affairs in an efficient manner whilst ensuring that all statutory requirements were met. This was a result of clear communication and close cooperation of all involved from the early planning stages right through to the conclusion.
Conclusion
An MVL offers company directors a compliant way to bring closure to a solvent business once its purpose has been fulfilled. BRI are able to assist directors with this process in a straightforward, transparent, and efficient way. If you or your clients are considering closing a company and think an MVL may benefit you, but are unsure of where to start, please do not hesitate to contact BRI.