Members Voluntary Liquidation (MVL)

What is it

An MVL is a formal process that allows you to liquidate your solvent (i.e. it can pay its debts) company. This is ideal for someone looking to retire or simply not wanting to run the business anymore as it allows the remaining assets to be distributed accordingly to shareholders, including cash at bank, whilst at the same time possibly being able to obtain Entrepreneurs Relief.

How Do You Do It

Firstly, it would be advisable to speak to an Insolvency Practitioner who prepares the documentation prior to taking any action. However, the first step would be to make a ‘Declaration of Solvency’ which needs to be sworn by a prescribed number of the Directors.

How much does it cost

Usually it’s a fixed fee to do the work, however cost depends on the complexity of the case.

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What is the declaration of solvency?

A sworn statement saying that the directors have assessed the company and are of the opinion that it can pay all of its debts, with interest, at the official rate within the next 12 months. This should include;

Name and address of the company
Names and address of the company’s directors
How long it will take to pay the debts (within the 12 month period)

This also needs to be accompanied by a statement of your company’s assets and liabilities.

After signing the declaration

You call a general meeting with shareholders no more than 5 weeks later to pass a special resolution to wind up the company.

During this meeting a resolution will also be passed to appoint an authorised insolvency practitioner as liquidator of the company, and take over the winding up.

The appointment will then be advertised in The Gazette within 14 days.

After signing the declaration

You call a general meeting with shareholders no more than 5 weeks later to pass a special resolution to wind up the company.

During this meeting a resolution will also be passed to appoint an authorised insolvency practitioner as liquidator of the company, and take over the winding up.

The appointment will then be advertised in The Gazette within 14 days.

advantages

It is TAX EFFICIENT as more than £25,000 can be distributed to shareholders avoiding the imposition of income tax, which would otherwise arise on dissolution. MVL's are usually LOW COST due to the work involved as well as enabling a QUICK CASH RELEASE as subject to shareholders indemnity we don’t have to wait for HMRC clearance!

disadvantages

An MVL does come with a greater upfront fee to pay than a simple dissolution. However, simply dissolving the company does not have the tax benefits afforded by going down the MVL route. In this situation, the benefits outweigh the costs.