Members’ Voluntary Liquidation
What is a members’ voluntary liquidation (‘MVL’) and why is it needed?
Once a successful company has come to the end of its useful life and wishes to cease trading an MVL is the formal process of closing down your solvent company and often 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 often 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 directors/shareholders approaching retirement and whom are looking to extract their long-term successful investment from their company be that cash built up over time or a sale of the trade and goodwill resulting in an amount of cash remaining in the company, although there are many other reasons for a Members Voluntary Liquidation.
The process of an Members Voluntary Liquidation – what can I expect?
In brief, once a company is in a position to enter Members Voluntary Liquidation, the following steps will take place:
- The directors 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 arrange all the relevant paperwork and necessary meetings for this.
- It is then the directors and shareholders, at a board meeting followed by a general meeting, that place the company into Members Voluntary Liquidation through the passing of a resolution and appoint licensed insolvency practitioners as liquidators. Again, we arrange all the relevant paperwork and necessary meetings.
- The liquidators will then be able to distribute the cash and/or assets once they are appointed.
When is best for my Company to enter Members Voluntary Liquidation?
As with all work we do at BRI Business Recovery and Insolvency, the earlier we are asked for help in assisting company directors/shareholders, the better, and it is never too early. The most valuable part of the work involved in an Members Voluntary Liquidation comes in the planning and preparation in making sure the company, directors and shareholders are all completely ready to enter Members Voluntary Liquidation.
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.
Contact us if you would like further information and assistance regarding any aspect of a Members Voluntary Liquidation for your company. There is no charge for doing so and it is without obligation.