Are you looking for a fast, low-cost tax-efficient way of unlocking your cash? Then a Members Voluntary Liquidation (MVL) may be the right solution for your business.
What is a Members Voluntary Liquidation (MVL)?
Members Voluntary Liquidation can often be referred to as a Members Liquidation or just shortened to MVL. It is, in essence the liquidation of a company that is solvent, a company is solvent by definition if it has assets sufficient enough to settle all liabilities in full plus statutory interest.
The Director’s decision to instigate an MVL is generally because the company has no further purpose and is a tax efficient way of distributing its assets and profits to the Shareholders. The assets are sold, and the proceeds would be used to pay creditors in full and the liquidator’s fees. Any remaining monies would be distributed to Shareholders.
Why use a Members Voluntary Liquidation (MVL)?
There are a number of reasons why Shareholders want to place a solvent company into Liquidation:
- Retirement of the Directors, for example the closure of a family business or the desire to transfer funds into a personal estate.
- A change in circumstances e.g. a desire to move out of the country or no longer wanting the responsibility of running a business.
- The Directors or Shareholders want to close the company and take money out in the most tax efficient manner.
- Tidying up of tax affairs for a singular or group of companies.
- The reorganisation of a group of companies after a merger for example or if there is a need to increase efficiency. More than one MVL may be required, but your insolvency practitioner can advise on this.
If your company is solvent then, an MVL can be used to distribute cash, liquid or physical assets between the Shareholders via the MVL and the Director’s obligations are removed.
Benefits of a Members Voluntary Liquidation (MVL)
- Tax Efficient – Following the Enactment of Extra Statutory Concessions Order 2012 (ESC Order) an MVL should be used where more than £25,000 is to be distributed to Shareholders. This avoids the imposition of income tax, which would otherwise arise on dissolution.
- Low Cost – Starting as low as £1,695 plus VAT & disbursements. Before engaging Wilson Field, we will provide you with a comprehensive breakdown of the disbursements & provide a fixed fee quote, which do differ depending on your circumstances.
- Quick Cash Release – Subject to shareholders indemnity we don’t have to wait for HMRC clearance!
- Fast – We will aim to distribute funds to you within 7 days of receipt of your cash from the company’s bank.
Qualify for a Members Voluntary Liquidation (MVL)
Members Voluntary Liquidation is generally available to companies meeting the following requirements:
- The Directors and/or Shareholders want a greater degree of certainty and comfort regarding ongoing liabilities than a striking off can give.
- The Shareholders wish to remove their investment from the company.
- The Directors of the company wish to retire.
- The company is no longer profitable but it is possible for the business to cease whilst still ensuring a surplus to the Shareholders.
- There has been a breakdown in the relationship between Directors and/or Shareholders of the company.
At Wilson Field we accept that costs are important and we will provide you with a written fixed fee quote to enable you to make a fully informed decision. The cost of an MVL can be as low as £1,695 plus VAT and disbursements.
To qualify for this low cost, the following 5 criteria must be met:
- The only assets the Company has is cash at bank and/or Directors/inter-company loans.
- All charges registered against the Company have been satisfied at Companies House.
- All accounts and returns will be prepared up to the date of Liquidation for submission to HMRC, including the submission of final VAT, PAYE and any subcontractor returns. You will be obliged to provide copies to the Liquidators of all of the final accounts, returns and evidence of final payments made.
- All liabilities of the Company have been settled prior to the Liquidation including all tax liabilities.
- Any distributions to the Shareholders will only be made in accordance with the Company’s articles.
If the above criteria are met, then you will qualify for our Low-Cost Option of £1,695 plus VAT and disbursements.
During the Members Voluntary Liquidation (MVL) process there are three disbursements that will be incurred by Wilson Field, these being the Liquidators Bond, Statutory Advertising and company search fees. The Liquidators Bond and Statutory Advertising disbursements are mandatory, payable to third parties and all Licensed Practitioners must incur them to carry out the process. Economies of Scale have enabled Wilson Field to negotiate very competitive rates with these third parties.
In most cases this can be a relatively simple procedure, where the company is brought to an end, creditors’ claims are settled and any surplus cash or assets are distributed to Shareholders. There are, however different ways in which the cash and assets can be distributed to Shareholders and a company’s individual circumstances will determine which method of distribution will be the most appropriate and tax efficient for its Shareholders.
- If the company has cash or assets of £25,000 or less, upon successful completion the Shareholders will be taxed as a capital gain on any monies or assets they receive.
- If cash and assets available for distribution are £25,001 or more the cash or assets received by Shareholders will be taxed as a dividend at the standard rate of 28%.
- Where the distributions to Shareholders are £25,001 or more, it may be possible (if certain criteria are met) for Shareholders to take advantage of entrepreneur’s tax relief. If this scenario is possible tax payable will only be 10%.
- Upon receipt of your enquiry we will issue an engagement pack.
- Discuss timescales & Declaration of Solvency
- Once returned we will contact you to discuss the completion of the Declaration of Solvency. This document must be made up to a date no more than 5 weeks before the company enters Liquidation and must be sworn by all of a majority of the Directors. Any Director making a Declaration of Solvency without having reasonable grounds for the opinion that the company will be able to pay its debts in full, together with interest at the official rate, within 12 months is liable to imprisonment or a fine, or both. You will need to attend a local solicitors office to have this sworn (they may charge for this typically £20). When sworn return this to us.
- Provision of information
- You will be required to provide copies of all accounts and returns that must be prepared up to the date of Liquidation for submission to HMRC, including the submission of final VAT, PAYE and any subcontractor returns, together with evidence of final payments made prior to the appointment of the Liquidators.
- Draft paperwork
- We will send you paperwork relating to the Liquidation process.
- Board Meeting
- Board minutes where the Directors will resolve to call a general meeting to put the company into Liquidation. Notice of that meeting will be given to the Shareholders (the Shareholders can consent to short notice). The Declaration of Solvency will be laid before the meeting and the Directors will instruct Wilson Field to deliver up the Declaration of Solvency to Companies House.
- General Meeting & appointment of Liquidators
- General meeting of the company where resolutions will be passed to put the company into Member’s Voluntary Liquidation and confirm the appointment of a Liquidators.
- We will prepare all of the statutory minutes, notices and resolutions. We will also check your company’s memorandum and articles to ensure compliance with notice periods and voting rights.
- Following appointment
- Once appointed we will file the Declaration of Solvency and resolutions confirming the appointment of the Liquidators at Companies House. We will also advertise the appointment in the London Gazette and advertise for creditors to submit claims. Even though there will be no creditors it is best practice still to advertise.
- Write to your bank
- We will request the company’s cash at bank and make a distribution within 7 days of receipt of the cash in accordance with the company’s memorandum and articles.
- Distribute cash
- The time frame of this will depend wholly upon us having the cash at bank. All Banks are different in terms of how quickly they will release the funds to the Liquidators. We will use our best endeavours to secure the release of the monies as soon as possible but please note that the Bank’s own framework may mean that funds are not released as quickly as you would like. If your company is/has been VAT registered, we will reclaim the VAT on the costs incurred and make a second and final distribution towards the end of the liquidation.
- We will also require a written indemnity as part of the engagement letter to provide the Liquidator with sufficient security should any claims arise. As long as all liabilities have been paid prior to appointment then the Liquidator will have no cause to rely upon the indemnity.
How long will the process take?
From receipt of your signed engagement paperwork and all of the required information the company can be placed into Liquidation within 7 days (subject to receiving the required consent from the Shareholders). Your cash can be distributed to you within 7 days of receipt of the cash. It should be noted that upon Liquidation, the company remains in existence until the process is complete. The period of the Liquidation should take no longer than 12 months, the only matters that the Liquidators will have to deal with that we cannot provide a firm assurance for on timing is obtaining tax clearance from HMRC and reclaiming the VAT on the costs. However, the Directors powers cease upon the appointment of the Liquidators and they are relieved of any ongoing statutory responsibilities, the Liquidators assume those. Responsibility for every aspect of the company’s affairs is passed to the Liquidators.
Why should I pay Wilson Field to do this when I can strike the company off?
There are significant potential disadvantages to striking off:
- The liability of every Director, managing officer and member of the company continues and may be enforced.
- The company may be restored to the register up to 6 years after it has been struck off.
- All assets and property of the company prior to dissolution become bona vacantia i.e. ownership is transferred to the Crown.
Declaration of solvency
A principal requirement for any company wanting to propose an MVL is the Directors must make a statutory declaration of solvency. The declaration states amongst other things that enquiries have been made into the company’s financial affairs, and the Directors are of the opinion that the company will be able to repay its debts plus statutory interest within twelve months or less.
The statement must include a current list of assets and liabilities and is sworn in the presence of a solicitor. The declaration has to be made five weeks or less before the Liquidation and be filed at Companies House within fifteen days from the start of the Liquidation.
If the company’s debts remain unpaid within twelve months of the declaration being made, the Directors must provide evidence to show how they formed the opinion the company was capable of repaying the debts at the inception of the Members Voluntary Liquidation. If no suitable proof can be provided, worst case scenario is the Directors could face imprisonment or a fine.
What is next?
Your first step must be to contact one of our consultants. They will guide you through the process and can arrange a face to face meeting at a convenient location to discuss matters further. The process is relatively straightforward and with our very competitive fixed fee quotes we can ensure a return to Shareholders is maximised.
Other matters to consider
Wilson Field will deal with the complete Liquidation process. We do not provide any tax advice to the Company and Shareholders, you should seek this from an accountant. It is up to the Shareholders to declare the relevant income/gains on your tax return. We can, however, recommend accountants to you should you require further advice in this regard.
Wilson Field offer a fast and efficient service with nationwide coverage from a network of regional offices. If you think a Members Voluntary Liquidation may be right for your business, get in touch today for free confidential advice with no obligation.
After recovering your investment from your company in a tax efficient manner, it makes sense to protect your hard-earned nest egg. Whatever your plans include – new ventures, retirement, etc., it makes sense to take professional advice before making any decisions.
Although Wilson Field does not offer financial planning and investment management advice, if you wish we can introduce you to an independent wealth management company which can provide a complete range of financial services for individuals and businesses. These could include pension scheme advice, inheritance tax planning, investments advice, etc. We only deal with experienced advisers who are authorised and regulated by the Financial Conduct Authority.
Initial meetings with a wealth management company are free of cost.
Financial advisory services include:
- Pensions and retirement planning
- Savings, investments and portfolio management
- Inheritance tax planning
- Life insurance and family protection
The independent tailored financial advice aims to help turn your plans into reality and the sooner you start your financial planning the greater your chance of realising your goals; short, medium and long term.