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How to prepare your company for Members’ Voluntary Liquidation (MVL)

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Members’ Voluntary Liquidation (MVL) is a process whereby solvent companies can be wound up, their assets realised, and funds distributed amongst shareholders in a tax-efficient manner.  If you are considering the voluntary liquidation of your company through MVL, there are some important preparations to consider before the process begins. Here we discuss how MVL works, and how to prepare your company for the process.

How does Members Voluntary Liquidation work? 

Members’ Voluntary Liquidation works by closing the doors of a solvent company, accounting for all funds/outstanding liabilities, and turning assets into cash. It must be overseen by a licensed insolvency practitioner, such as ourselves, who supervises the process from start to finish. 

Reasons for pursuing an MVL can range from the retirement of a primary director, the closure of a company that no longer wishes to trade, or reorganisation after a corporate merger. It allows company funds to be divided amongst shareholders without the imposition of income tax on distributions.  

How to prepare your company for MVL

Ensuring that your company is prepared to enter into MVL can make the process more straightforward, as well as cutting costs. Here are some of the steps you can take to ensure that your business is ready to begin the process of Members’ Voluntary Liquidation: 

Hold internal company discussions 

Before exploring the possibility of MVL, it is crucial to keep all stakeholders in the business informed of the company’s intentions. In order to ensure that your company is ready to begin the process, meetings should be held amongst directors and shareholders before contacting insolvency professionals. 

Discuss your situation with insolvency professionals 

Once vital internal discussions have been carried out amongst its directors and shareholders, the company should approach a licensed insolvency practitioner (IP), such as ourselves, to discuss the suitability of MVL. Through an initial consultation with one of our advisors, the ins and outs of Members’ Voluntary Liquidation can be discussed, allowing you to recognise whether the process is right for your company. 

What are the benefits of MVL? 

Members’ Voluntary Liquidation carries many benefits for solvent companies wishing to cease trading. These include: 

Tax-efficiency  

Members’ Voluntary Liquidation allows for company funds of over £25,000 to be distributed amongst directors/shareholders without the implication of Income Tax. In alternative procedures such as dissolution, such tax would be payable on these funds. 

Quick cash release/distribution 

Subject to shareholders indemnity, MVL does not require HMRC clearance before cash is released. This means a fast turnover for shareholders, with cash usually being distributed within 7 working days of receipt. 

Preparations that may cut the cost of MVL 

While not compulsory, there are certain steps your company can take to make the process of MVL more straightforward, and therefore cut costs. These include: 

Make arrangements to sell remaining stock and assets 

By arranging the sale of any outstanding stock/assets that your company may have, the work needed to liquidate your company is reduced. This can help to cut the costs associated with Members’ Voluntary Liquidation. 

Settle your directors loan account 

Consider the position of your company’s directors loan account – do you owe the company money, or does the company itself owe one of the directors money? Settling any remaining liabilities of this nature before beginning the MVL process can reduce the complexity, and therefore cut associated costs. 

Settle any outstanding company debt or liabilities 

By settling any remaining amount of company debt with your creditors before entering MVL, the process is simplified. This means that the liquidation can be carried out quicker, with more efficiency, and costs may be reduced.  

How can I begin the process of Members Voluntary Liquidation? 

Once you have decided that your company wishes to pursue MVL, it is crucial to contact us as soon as possible. Through a free consultation with one of our specialist advisors, we can evaluate your company’s current position, and determine the level of work needed to carry out Members’ Voluntary Liquidation. You will then be provided with a quote for the service that best fits your company, and can make the decision whether to carry the process forward. 

In summary 

Members’ Voluntary Liquidation (MVL) is a wind-up procedure for solvent companies that comes with many benefits. These include tax efficiency in distribution of company funds over £25,000, and a quick turnaround for the release and distribution of company cash. 

By preparing your company to begin MVL, the process can be simplified, potentially cutting costs and reducing turnaround time. By taking measures such as reviewing directors’ loan accounts, settling outstanding debts, and arranging the sale of company stock/assets, you can prepare your company for maximum efficiency in its liquidation. 

How we can help 

If you are considering Members’ Voluntary Liquidation to wind up your company, we can help. Our team of licensed and regulated insolvency professionals are on hand to provide impartial advice, evaluating your company’s position, and its suitability for MVL. Through a free consultation with one of our advisors, we can provide you with a quote for the service that best fits your company’s needs. To begin to prepare your company for tax-efficient liquidation, get in touch today. 

Beverley Horton

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Authored by Lisa Hogg

Lisa Hogg

Director & Licensed Insolvency Practitioner

Beverley Horton Christopher Callaghan Stephen Hall

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