In this video, Michael Chamberlain takes us through the main points, advantages, and drawbacks of the Members Voluntary Liquidation.

What is it?

A Members Voluntary Liquidation (MVL) involves the directors swearing a statement, known as a declaration of solvency, to say the company will be able to pay all its debts within a period not exceeding twelve months.

Who is it for?

  • Shareholders who wish to minimise their tax liabilities on funds withdrawn at the end of the company’s life.
  • A company which may have come to the end of its useful life, possibly a dormant/redundant subsidiary company, where the shareholders have decided to cease trading but the company remains solvent.

How can Chamberlain & Co help?

The company will need to instruct an insolvency practitioner such as Chamberlain & Co to advise the directors on the most appropriate course of action. If liquidation is the chosen option a licensed insolvency practitioner from Chamberlain & Co can be appointed as the liquidator.

The Process

The directors of the company swear a declaration of solvency and by way of a Special Resolution the shareholders of the company resolve to place the company into liquidation and appoint a liquidator. The declaration of solvency must state that the directors of the company have conducted a full enquiry of the company’s affairs and have formed the opinion that it will be able to pay its debts with interest at the official rate within a period not exceeding 12 months.

Advantages

  • The liquidator winds up the company minimising risk to shareholders who otherwise could be at risk of a creditor resurrecting the company for up to 20 years and making claims against them. This can occur if the company is subject to voluntary strike-off.
  • There can be tax benefits in considering a Members’ Voluntary liquidation. This process ensures that the final distribution is subject to Capital Gains Tax rather than Income Tax. Hence the top rate of Tax could be reduced from 50% to 28%, and/or even 10% if Entrepreneurs Relief is applicable.

Disadvantages

  • The control of the company’s assets passes to an Insolvency Practitioner.
  • An advert for claims will be published for part of the closure process, but it will emphasise that the company is solvent.

Other Options Available

Company Voluntary Arrangement (CVA), Administration, Striking-off procedure under the terms of the Companies Act
Administration
Administration
Bankruptcy
Bankruptcy
Liquidation
Liquidation
Company Dissolution
Company Dissolution
Receivership
Receivership
Business Restructure
Business Restructure

Get in touch with us today on 0113 242 0808