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Voluntary Liquidation

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There are two types of voluntary liquidation, these being members voluntary and creditors voluntary. The process that is right for you will be determined by the solvent or insolvent nature of your limited company. We can help you to identify if your company is insolvent and needs to cease trading.

Creditors Voluntary Liquidation – Insolvent

A CVL is for companies who can’t afford to pay their debts when they fall due, so a director may want to simply walk away from the business, or a liquidation might be the best option for creditors as the company has little cash-flow to make a formal arrangement plan. The process involves an insolvency practitioner (IP) like ourselves taking control of the company, the director thus relinquishing his/her responsibilities. The IP then realises the company assets in order to get the best return for creditors. The company is then dissolved and ceases to exist, along with any debts it had.

See more on how a CVL works

Members Voluntary Liquidation – Solvent

An MVL is a process which solvent companies go through in order to close down in a tax-efficient way, unlocking entrepreneur’s relief for directors, thus making an MVL more beneficial than a dissolution. A company is solvent if it has sufficient funds to settle all liabilities to creditors and statutory interest within a given period of less than 12 months. The process is generally for directors who no longer to continue trading, or wish to retire.

See more on how the MVL process works

Voluntary liquidation

In summary

When you are considering a voluntary liquidation you will require the advice and guidance of a licensed insolvency practitioner, and the process that your company needs will depend on whether it is solvent or insolvent. A creditors voluntary liquidation allows a company struggling with debt to be closed down whilst still giving the best possible return to creditors and putting the debt to bed. A members voluntary liquidation allows a solvent company which has come to the end of its life to be closed down in a way which gives the best return to directors through tax rates associated with entrepreneur’s relief.

How we can help

Whether your company is solvent or insolvent, our experienced advisors can discuss your company and its situation with you and assess the options available to you. A voluntary liquidation may not be the most appropriate resolution for you. We can examine your business and give you free and regulated advice to ensure you deal with your situation in the most appropriate way.

Authored by Ruth Jacks

Ruth Jacks

Associate & Compliance Manager

Beverley Horton Christopher Callaghan Stephen Hall

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