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A members’ voluntary liquidation (MVL) is a process whereby solvent companies may close their doors, and distribute their funds amongst shareholders.
Below are a series of frequently asked questions about the service of MVL, answered as plainly as possible.
An MVL is a liquidation process available to solvent companies only. It is a voluntary liquidation that may be pursued for a number of reasons. These include the retirement of directors, closure of a company after a merger, or simply closing the doors on a company that no longer serves a purpose. If you are looking to liquidate your company for one of these reasons, and have more than £25,000 to distribute between shareholders, then MVL may be the best option.
A company is insolvent when its financial situation has declined to the point that it can no longer meet its liabilities. If your company is struggling to meet payments on outstanding debt, rent, or regular bills, then it may be insolvent. If your company’s financial health is strong, and all liabilities have been or continue to be met accordingly, then it is likely that it is solvent.
Is my company solvent or insolvent?
Members’ voluntary liquidation provides greater tax efficiency than striking off due to there being no obligation to pay income tax on distributions to shareholders. Thanks to the Extra Statutory Concessions Order (2012), taxes that would otherwise be imposed upon dissolution do not arise in MVL.
Unfortunately, Wilson Field does not offer advice on issues regarding tax specifically. We suggest directors and traders seek the help of tax advice professionals on such matters.
Wilson Field provides a three-tiered pricing structure in regard to MVL:
£1,695 + VAT & disbursements
This option is appropriate for companies who have no outstanding liabilities at the point of liquidation, and simply require the company’s funds to be distributed between shareholders.
£1,995 + VAT & disbursements
If your company has outstanding liabilities – debts yet to be settled, this price would be the most appropriate. This also covers companies that require assets to be distributed in specie.
Bespoke MVL + VAT & disbursements
Our bespoke MVL service would see us handle the valuation and sale of any physical assets, as well as oversee any outstanding or disputed creditor claims against your company. We offer a free face-to-face meeting with one of our specialist consultants to discuss your situation, and also uphold constant support throughout the process.
Explore our MVL pricing structure in detail here
While striking off may be the best option for some companies, if you have a bank balance of over £25,000 at the point of liquidation, it is unlikely to be the most suitable in your situation. The benefits of an MVL are clear for companies in this position, providing ease of access to funds, and tax benefits.
There are certain benefits to MVL that makes it a positive choice for solvent companies wishing to liquidate. These include:
The Extra Statutory Concessions order (2012) means funds of over £25,000 can be distributed to shareholders without income tax being imposed. This differs from dissolution, which would require such funds to be taxed upon distribution.
Quick cash-release/distribution turnaround
Subject to shareholders’ indemnity, HMRC do not need to give clearance before cash is released. We are usually able to distribute funds within seven working days of receipt of cash from the company’s bank.
Visit our page on the tax-efficient benefits of MVL here
When a company begins liquidation proceedings, it is required that this is advertised in the London gazette in order to allow any uncontacted creditors to put forward their claims. Disbursements are a mandatory part of MVL, and comprise advertisements at several stages of the liquidation.
Subject to receiving the necessary consent from shareholders, as well as signed engagement paperwork, we aim to distribute funds within seven working days of receipt of cash from the company’s bank.
Wilson Field are licensed and regulated insolvency specialists with experience in handling procedures for companies small and large. All of our insolvency practitioners, and operations as a company, are monitored by The Insolvency Service. All funds that pass under our care are properly handled and distributed appropriately.
As long as your company is eligible for MVL, there is no reason why you should not be able to use the process again. MVL is not, however, to be used as a process to improve annual tax efficiency. For advice on your company’s tax situation, it is important to seek the advice of a professional advisor.
When your company liquidates, employees will be made redundant. As your company is solvent, it may have the funds available to cover redundancy payments. In any situation where this is not the case, employees are eligible to claim from the Redundancy Payments Service.
Visit the government’s information page on redundancy pay here
Members’ voluntary liquidation (MVL) is a process for solvent companies whereby the business can be closed, and funds distributed between shareholders in a tax-efficient manner. The process may be pursued for a number of reasons, including the retirement of directors, or closure of one company after a merger. A company is eligible to pursue an MVL if they are able to cover all of their liabilities, and have funds of over £25,000 to be distributed between shareholders.
How we can help
Our team of licensed and regulated insolvency professionals have a wealth of experience in providing support to companies pursuing liquidation. Through a free consultation with one of our experienced advisors, we can evaluate your situation, and walk you through the options available. To find out more, get in touch today.