BRI Business Recovery and Insolvency
We are an independent company of insolvency practitioners committed to finding the right solutions for businesses and individuals in financial difficulty
What is a members’ voluntary liquidation (“MVL”) and why is it needed?
Once a successful company has come to, or is coming to, the end of its useful life and either has, or wishes to, cease trading, an MVL is the formal process of closing down your solvent company and provides the most tax efficient way for shareholders to receive the surplus of cash and/or assets remaining in the business (after all liabilities have been paid).
The reason why an MVL is the most tax efficient process for shareholders of solvent companies is due to them being entitled to receive Business Asset Disposal Relief (formerly known as Entrepreneur’s Relief), which provides a far more generous taxable rate than that of standard dividends made in the ordinary course of business.
An example of who would benefit from an MVL, and what we ordinarily see, is director(s)/shareholder(s) approaching retirement and whom are looking to extract their long-term successful investment from their company, although there are many other reasons for an MVL.
The process of an MVL – what can I expect?
In brief, once a company is in a position to enter MVL, the following steps will take place:
- the director(s) will confirm that the company is solvent (assets outweigh the liabilities) via a Declaration of Solvency, which is sworn in the presence of a solicitor and filed at Companies House. We can arrange all the relevant paperwork and necessary meetings for this.
- It is then the shareholders, at a general meeting (and as per the company’s Articles of Association), that place the company into MVL through the passing of a resolution and appoint licensed insolvency practitioners as liquidators. Again, we can arrange all the relevant paperwork and necessary meetings.
- The liquidators will then be able to distribute the cash and/or assets, as detailed in the Articles of Association, once they are appointed.
When is best for my Company to enter MVL?
As with all work we do at BRI, the earlier we are asked for help in assisting company director(s)/shareholder(s), the better. The most valuable part of the work involved in an MVL comes in the planning and preparation in making sure the company, director(s) and shareholder(s) are all completely ready to enter MVL.
We work with you every step of the way and provide all the relevant paperwork, arrange for the solicitors (if you do not have one of your own choosing) in readiness for the swearing of the Declaration of Solvency and all other requirements as and when necessary.
If you would like to discuss more regarding the logistics of an MVL and whether it is right for you, your company or a client of yours, please contact us for a free and without obligation quote.