About Members’ Voluntary Liquidation
A 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.
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 is then:
1. Hold a Board Meeting;
At which the Directors resolve to call a meeting of 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. Hold the Shareholders’ Meeting;
At which 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.
4. The Liquidator Completes the MVL;
Pay less tax on the profits you want to take out of your business. You receive your money within a matter of weeks.
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 at the shareholders’ meeting (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
1. Payments to shareholders are treated as distributions of capital and as such attract tax at 28% for those in the higher rate band as opposed to the 32.5% (or 38.1% if over £150,000) payable on dividends from April 2016.
2. Because the payments are treated as capital distributions, Entrepreneur’s Relief is available. This reduces the tax payable to 10% on all distributions up to £10 million. This represents a massive tax saving for shareholders.
3. 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.
4. 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.
When you get in touch with us, you will speak directly to a licensed Insolvency Practitioner from the outset. We will take the time to understand your Company’s financial position and what outcome you are hoping for.
As you can see, there are a number of excellent benefits to placing your Company into Member’s Voluntary Liquidation which our service is designed to help you make the most of 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.
For free advice on your business debts call us today on 0800 0843 406