Members Voluntary Liquidation (MVL)
Release capital from your SOLVENT business with an MVL
A Members Voluntary Liquidation or an MVL is a voluntary procedure to wind up the affairs of a SOLVENT company. It is used to close or wind up a company maybe because the director(s) wish to retire, re-organise or restructure the business or the company is simply not required any more.
To enter into an MVL, the directors are required to swear a Declaration of Solvency stating the company is able to, and will pay all its debts in full. A shareholder meeting must be held to appoint a licensed insolvency practitioner, like Gibson Hewitt, to complete the MVL. Once appointed, the licensed insolvency practitioner acts as liquidator, pays any liabilities, and distributes assets including reserves to shareholders or members. If the shareholders pass a resolution, assets can be distributed in specie, meaning the assets themselves do not have to all be sold and turned into cash for distribution. For example book debts or a motor vehicle can be distributed “in specie” without a necessary sale, so any reduction in value of the assets and costs of selling the assets are removed.
The key advantages of a Members Voluntary Liquidation:
- The liquidator has the ability to return funds to Shareholders as capital – which can have considerable tax advantages as all distributions will be capital repayments and subject to Capital Gain Tax (“CGT”) rules rather than PAYE/NI procedures or dividends. Directors who have been a director and shareholder of a company for at least 12 months and the company traded in that period can claim Entrepreneurs’ Relief which, when coupled with the personal allowance for CGT of £11,100 with taxation currently at 10%, can be extremely favourable when compared to higher rates of PAYE.
- The liquidator has the ability to restructure a business, perhaps using a hive down and to distribute assets (or shares in subsidiaries) in specie.
- An MVL can be used as a means of resolving a shareholder dispute as the company will no longer trade and when the liquidation is complete the company simply ceases to exist.
- An MVL is quick and fairly cheap compared to other restructuring procedures.
Striking off under Section 1003 Companies Act 2006
In certain circumstances it is appropriate to have the company simply struck off – but care needs to be taken to avoid some pitfalls. There are circumstances where the company can be restored to the register and incidents where the Treasury Solicitor can demand payment of the share capital. It is vital to take advice from a licensed insolvency practitioner to determine whether a Members’ Voluntary Liquidation MVL or winding up is the best option.
Call now and ask for Lynn Gibson for advice. We offer a FREE 1 hour consultation with no obligation to proceed.