What Is A Members Voluntary Liquidation? If you are a director of a solvent company, Oliver Elliot can help you in a tax efficient way to free up your capital.
What Is A Members Voluntary Liquidation?
A Members Voluntary Liquidation (MVL) is a solvent liquidation and one of the ways to liquidate your company when the creditors can anticipate and ought to obtain 100 pence in the pound.
An MVL is a procedure that is not strictly an insolvency procedure because the company is solvent and the creditors will be paid in full. It is a procedure that enables a business’ trade to be concluded and for a distribution to be provided to the shareholders or otherwise known as the members. It is commonly undertaken for reasons of tax efficiency to obtain entrepreneurs relief for capital gains tax purposes.
The process looks to obtain tax clearance from H M Revenue and Customs so that the Directors and Shareholders can be confident that there will be no claims remaining against the company.
- The procedure will involve a resolution to wind up the company.
- Statutory Declaration of Solvency to demonstrate ability to pay debts in full.
- Appointment of a Liquidator to wind up the company.
When Would You Opt For A Members Voluntary Liquidation?
You may choose members’ voluntary liquidation if your company is ‘solvent’ (can pay its debts) and one of the following applies:
- you want to retire
- you want to step down from the family business and nobody else wants to run it
- you do not want to run the business any more
To pass a resolution for members’ voluntary liquidation, you must make a ‘Declaration of solvency’
You’ll need to review the company’s assets and liabilities just before making the declaration.
The stages applicable to the MVL Procedure are set out in detail for you below.
How To prepare For Members Voluntary Liquidation
In order to prepare for a Members Voluntary Liquidation of a company the following is required:
- Statutory Declaration of Solvency based on an Estimated Statement of Affairs
- Meeting of the Board of Directors to confirm the winding up
- Members Resolution authorising the winding up and appointment of a liquidator
What Is The Procedure?
Stage 1 – Initial Assessment
- Is the company solvent?
- Is MVL fit for purpose?
Stage 2 – Pre-Liquidation Period
- Cease trading operations
- Identify actual and or contingent liabilities
- Provision of an indemnity
- Review and conclude final tax affairs of company
- Execute pre-Liquidation transactions
- Prepare statutory Declaration of Solvency
Make a declaration of solvency
Write a statement saying that the directors have assessed the company and believe it can pay its debts, with interest at the official rate. You should also include:
- the name and address of the company
- the names and addresses of the company’s directors
- how long it will take the company to pay its debts – this must be no longer than 12 months from when the company’s liquidated
You also need to include the statement of the company’s assets and liabilities.
Stage 3 – Commence Liquidation
- Convene directors’ meeting
- Review accounts to confirm solvency of company
- Sign & certify statutory Declaration of Solvency (valid for five weeks)
- Cease interest on bank account
- Convene Extraordinary General Meeting of shareholders or undertake written resolutions
Stage 4 – Commencement of Liquidation
- Extraordinary General Meeting or written resolutions undertaken
- Pass relevant resolutions
- Appointment of Liquidator
Stage 5 – Post Liquidation
- Statutory filing and advertising
- Notification of the Liquidator’s appointment to authorities and interested parties
- Collection of books and records
- Open new Liquidation bank account
- Complete asset realisation where applicable
- Agree and settle creditors’ claims
- Ensure Corporation Tax, PAYE & NIC and VAT compliance
- Obtain tax clearance
- File Liquidator’s receipts and payments accounts
- Distribute surplus assets to shareholders including any distribution in specie
Stage 6 – Close of Liquidation
- Final report and Liquidator’s final receipts and payments account
- Hold final meeting and obtain release of Liquidator
Stage 7 – Dissolution
- Company dissolved three months from the date of filing of Liquidator’s final return Disposal of books and records (12 months after dissolution)
Don’t hesitate to contact us at our offices on 020 3925 3613 to discuss your MVL needs. We can assist all companies in need of such a service.