Members’ Voluntary Liquidation Process
Members’ Voluntary Liquidation is the option for solvent companies when it comes to liquidation. If you are a director of a company that you feel no longer has a purpose and the company has enough funds to pay back creditors in full then this process would be the option for you.
Members’ Voluntary Liquidation FAQs
- A Members’ Voluntary Liquidation (MVL) is a tax efficient method for distributing or restructuring the assets and/or trade of a company.
- The tax advantages will include capital treatment of distributions and the availability of Entrepreneurs’ Relief where the criteria are met.
- Where Entrepreneurs’ Relief is available then the tax rate can be as low as 10%.
- A Members’ Voluntary Liquidation (MVL) can be used to distribute liquidated assets (cash), assets in specie (non-cash assets) or shares in newly formed companies (using a S.110 agreement).
- An MVL is an Insolvency Act procedure which will need a Licensed Insolvency Practitioner to act on the case. All our in-house Licensed Insolvency Practitioners are licensed by the Insolvency Practitioners Association and are just a phone call away.
- The MVL process applies where the directors and shareholders decide to cease trading their solvent limited company.
The following must be true for a Members’ Voluntary Liquidation to be accepted:
- The Company is solvent – i.e. it has sufficient money to pay its creditors in full and still has surplus funds or assets available
- The surplus funds available after paying creditors in full is more than £25,000
- The shareholders are keen to find the most tax efficient means of distributing those funds
- The shareholders engage the services of a Licensed Insolvency Practitioner
What are the costs of a Members’ Voluntary Liquidation?
At Insolvency.com we are Licensed Insolvency Practitioners and are able to act as liquidators in order to perform the Members’ Voluntary Liquidation process.
A typical Members’ Voluntary Liquidation can be dealt with for a very reasonable cost; from as little as £2,500 + vat + disbursements. The simpler the case the lower the cost.
Tax advice should always be taken when considering an MVL. We are able to provide this advice through our partner network or are always delighted to work with your existing advisors.
Simply call us to get a price for your specific circumstances and you will speak to a Licensed Insolvency Practitioner who will be the company’s liquidator if appointed.
Change in Legislation
March 1st 2012 saw changes to the HMRC Extra Statutory Concession C16 (ESC-C16). This change meant that any distribution to shareholders upon closure of a Company over £25,000 will be treated as income, unless an MVL is used.
Where the Company’s closure is dealt with via a Members’ Voluntary Liquidation (MVL) the funds can be distributed as capital. This will reduce the burden of taxation, meaning that less of the shareholders’ hard earned cash finds its way to the exchequer.
Members’ Voluntary Liquidation’s Immediate Cash Distributions and No Risk
Through sensible planning it is possible to arrange for the cash held within the company entering into an MVL to be distributed immediately upon the appointment of liquidators.
Feel free to call to discuss your company’s individual circumstances.
Section 110 FAQs
- S.110 refers to Section 110 of the Insolvency Act 1986.
- Section 110 is used as part of a restructuring process within the Members’ Voluntary Liquidation (MVL) process.
- The use of S.110 within a Members’ Voluntary Liquidation (MVL) allows for shares in a subsidiary company to be distributed to the original shareholders of the holding company.For example a company which holds property of assets and a trading business could be split into two companies one holding the trade and one holding the property assets.
- Tax advice should always be taken when considering S.110 within a Members’ Voluntary Liquidation (MVL). We are able to provide such advice through our partner network or are always delighted to work with you existing advisors to provide the regulated part of any such restructuring.
What is a Members’ Voluntary Winding Up
Members’ Voluntary Winding Up is a term used to refer to a Members’ Voluntary Liquidation.
Company dissolution – Beware Bona Vacantia
The term “Bona Vacantia” literally means vacant goods and is the legal name for ownerless property, which by law passes to the crown.
Bona Vacantia will usually apply to any assets left in a company once it has been dissolved.
If dissolution is being considered as an end of life solution for a company care must be taken is in relation to the level of share capital left in a company.
Take a look at the website of the Treasury Solicitor if you’re unclear.