MEMBERS VOLUNTARY LIQUIDATION
A Members’ Voluntary Liquidation allows you to close down a financially solvent company.
A Members’ Voluntary Liquidation allows you to close down a financially solvent company.
✓ Gain advice on whether a Members’ Voluntary Liquidation is right for your business
✓ Learn about the financial outcomes of Voluntary Liquidation
✓ Find out how the Members’ Voluntary Liquidation process works and what you need to do
✓ Get expert support and discover other ways to approach closing a business
The first stage of the MVL process is to instruct a licensed Insolvency Practitioner to help you. This is true even despite the fact that this process is only suitable for solvent companies. A Practitioner can help to examine the financial situation of the company, including reviewing all of its assets and liabilities, to determine whether or not it can be legally declared solvent. Following this process, the company’s directors must write and sign a declaration of solvency in the presence of a solicitor, in order for the liquidation process to begin, which must later be filed with Companies House.
Once the declaration is made, the directors must convene a General Meeting of Members within the next five weeks. At this meeting, members will agree a date upon which the business will close and pass a Resolution for voluntary winding up – at least 75% of shareholders must vote in favour of the motion. At that stage, the company can appoint a Liquidator to begin the process of closing the company.
The winding up of the business will be reported in the Gazette, in order to notify all relevant parties. The Liquidator will then begin their part of the process, closing the company’s bank accounts, realising any assets and paying any outstanding debts to creditors. If any funds remain, they will be distributed to company shareholders. The Insolvency Practitioner will produce a final report, distribute this to the relevant stakeholders, and notify Companies House. After three months, the company will be formally dissolved.
If you are determined to close down your business, a Members’ Voluntary Liquidation is a tax-efficient way to do so, provided the business is solvent. While you may have to pay Capital Gains Tax on any profits you make from the sale of the business, you may also be able to benefit from Business Asset Disposal Relief, also known as Entrepreneurs’ Relief. This allows you to pay tax on any gains you made as a result of the sale at a flat rate of 10%, rather than the 20% that would otherwise apply in most circumstances.
Depending on the funds available within the business, the Insolvency Practitioner may be able to make a distribution immediately. For these reasons, if you are certain that closing your business is the right approach for you, a Members’ Voluntary Liquidation is often the right way to do so.
If your company cannot pay its debts, or its liabilities exceed its assets, it is considered insolvent and in such cases, a Members’ Voluntary Liquidation does not apply. If it is necessary, there are other ways to close down an insolvent business, including through a Creditors’ Voluntary Liquidation. This is a mechanism in which you convene a Meeting of Creditors with a proposal to liquidate the business and realise any assets.
However, closing a company is often not the only way (nor the best way) to resolve the challenges of corporate debt or other financial problems. Instead, there may be a number of company rescue solutions that might be useful in the circumstances your company is facing. These approaches can restore a business to solvency and help it to recover and flourish. They will not apply in every situation, but the sooner you act after noticing that your business is facing financial difficulties, the more options you will have available, and the better the prospects of your company.
If you are concerned that your company may need to close due to financial difficulties or pressure from creditors, contact the team at Company Insolvency Advice today. We can provide fast, free advice on the rescue solutions that could return your company to solvency, and enable you to pay your debts without the need to close your business. If this proves to be the only available option, we can also support you through the process to ensure the fairest possible outcome for all parties.
The formal process to close down a solvent company under an MVL generally follows the same structure, but delays can occur in a number of ways. For example, if it takes a long time to sell the company’s assets, or to reach an agreement with the company’s shareholders, this can introduce delays into the process. While this means it is impossible to estimate the length of time that the process could take, we can explain how the process unfolds and where delays are typically encountered.
In straightforward cases, the MVL process can take a few months. However, more complex cases with a large number of assets, creditors, or legal complications can take much longer, sometimes even years.
This is another reason why working with an expert advisor or insolvency practitioner at an early stage can help. They can talk about your company’s affairs in detail and give you a sense of how complicated the MVL process will be as a result. From there, you will have a better sense of how long this might take and be able to approach this process with realistic expectations.
While a solvent company does not usually provoke the same concerns as an insolvent company, there are still financial matters to consider before taking this approach. For example, there are costs involved in an MVL that a company’s shareholders and directors might need to consider before moving ahead with the liquidation.
While there are some expenses associated with an MVL, it is one of the most tax-efficient ways to close a profitable company, pay off any outstanding creditors and keep shareholders happy.
An MVL and a strike off are both methods for closing a solvent company in the UK, but they differ in terms of complexity, cost, and suitability for various situations. Striking off is a simpler, less formal procedure, typically suited for dormant or small companies with no (or minimal) assets or liabilities. There’s less scope for tax planning in terms of asset distribution to shareholders, as assets must be distributed before the striking off application is made.
The process is generally quicker than an MVL and the cost is usually lower, with the main expense being the Companies House filing fee. However, this is partly because assets have already been distributed. That means that for solvent companies that have significant assets, a strike off is not a suitable option.
Striking off doesn’t provide the same level of legal finality as an MVL. The company can be easily restored to the register by a creditor, member, or other interested parties within a certain period if they have a valid reason. Creditors are not formally involved in the process, which leaves open the possibility for them to submit claims against the directors if it later turns out that the company was not actually free of debts.
All in all, it is best to seek expert advice before moving forward with either a liquidation or a strike off. You must consider tax benefits, fees and other factors, many of which will be specific to your business. That means there is no one-size-fits-all approach. To avoid creditor claims and conflicts, speak to an experienced advisor about closing your business in the way that will best suit your circumstances.
If you need advice on whether an MVL is the right way to close your company, get in touch with the team at Company Insolvency Advice today. We can talk you through your options and, if you are interested in moving forward, start the process on your behalf.
WHO ARE WE
Company Insolvency Advice is a leading business rescue, corporate restructuring and insolvency specialists, with years of experience in providing corporate debt solutions. We understand the daily pressure you are under as a director and our team of expert consultants cover the whole of the country in order to discuss debt solutions with company directors.
From our office in the North West of England, we provide a national advice service to the whole of England, Scotland and Wales. We aim to offer tailored, high quality service of local business advisors, with the experience, knowledge and support of a huge, national organisation.
Good communication holds the key to any financial advice for businesses and our remit is to provide clear and accurate debt advice.
Our staff have many years’ experience in dealing with ever-expanding creditor pressure and economic issues that affect companies.
Company Insolvency Advice prides itself on the reputation it has built up over the years in assisting company directors resolve various financial issues.