Members Voluntary Liquidation

What is Members’ Voluntary Liquidation?

A Members Voluntary Liquidation (MVL) is the formal process to wind up a solvent company (a company that has assets which exceeds liabilities, and creditors therefore have, or will be fully repaid within the next 12 months, including statutory interest – if applicable).

The purpose of a members’ voluntary liquidation is to wind up a solvent company & distribute the assets to the shareholders as capital rather than income, which attracts significantly lower taxable rates for the individual shareholder.

MVL’s can provide taxation benefits, such as capital gains tax being enabled rather than income tax. In some cases, some members may qualify for Business Asset Disposal Relief (formally known as Entrepreneurs Relief), which can reduce the tax rate down to 10%.

Why is an MVL used?

An MVL enables the company to be wound down and closed properly, providing potentially significant tax advantages for shareholders.

When to use an MVL

An MVL can only be used when a company is solvent and able to meet any contractual obligations and/or debts, and clear any legal disputes. The company’s affairs must be in order and all documents must be ready for the insolvency practitioner when the MVL proceedings start.

How does an MVL work?

The MVL process is often utilised by shareholders who have built up sufficient reserves within their business, and no longer require use of the company. Ultimately, the MVL process involves the shareholders of a company passing the necessary resolutions to appoint a Liquidator who must be a Licensed Insolvency Practitioner.

The procedure requires 75%, in value, of the shareholders to agree.

Declaration of solvency

A Declaration of Solvency must be prepared and sworn in the presence of a solicitor. The Declaration of Solvency is a statement of assets and liabilities. In cases where there are more than one director, both (if only two) or a majority (if three or more) must swear the document.

This states that the company can repay debts within 12 months.

Once the Declaration of Solvency has been sworn, meetings are held with the shareholders and the necessary resolutions are passed, and the appointment of a Liquidator confirmed

How much does an MVL cost?

Depending upon the level of work required to be done by the appointed liquidator, fees usually range from £4,000 plus VAT and disbursements, upwards.

Please get in touch to discuss a detailed quotation.