MEMBERS VOLUNTARY LIQUIDATION

Do you need to voluntarily close down a company that is solvent?

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WHAT IS A MEMBERS’ VOLUNTARY LIQUIDATION?

Members’ Voluntary Liquidation is the process of closing down a company that is solvent. This means that a company must be capable of meeting its financial obligations, such as tax and wages, and the value of its assets exceeds the total sum of all its debts and liabilities. (Assets can include company equipment, vehicles, stock, contracts, invoices, bank account funds and property).

If this is not the case and the company is insolvent, then a Members’ Voluntary Liquidation is not viable and it must instead be put through a Creditors’ Voluntary Liquidation. During a Members’ Voluntary Liquidation, the role of the liquidator would be to close down the company, ‘liquidate’ company assets, and distribute the proceeds amongst company members.

ADVANTAGES OF MEMBER’S VOLUNTARY LIQUIDATION

 

  • A tax efficient way to close a solvent company.
  • An immediate first distribution can be made if funds permit.
  • Can transfer assets to another company.
  • You may be able to take advantage of entrepreneur’s relief.

WHAT IS THE DIFFERENCE BETWEEN MEMBERS’ VOLUNTARY LIQUIDATION AND CREDITORS’ VOLUNTARY LIQUIDATION?

Members’ Voluntary Liquidation is the formal process of voluntarily closing down a solvent company. Creditors’ Voluntary Liquidation is the formal process of voluntarily closing down an insolvent company. The role as an appointed liquidator differs between these two types of voluntary liquidation. During a Members’ Voluntary Liquidation, funds are distributed following the realisation of the company assets amongst company members. Whereas, during a Creditors’ Voluntary Liquidation, funds are distributed amongst creditors in order to pay off company debts.

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THE MEMBERS’ VOLUNTARY LIQUIDATION PROCESS

  • Director of the Limited company instructs a Licensed Insolvency Practitioner who will assist with the process.
  • Company provides all the relevant information and a date that the company is to be placed into liquidation is agreed (General meeting of members).
  • Prior to the general meeting of members a Declaration of Solvency is signed by the Directors in the presence of a solicitor, which states that the company will settle its liabilities and interest within a 12 month period from the date of liquidation.
  • At the general meeting of members the company goes into Liquidation and a Liquidator is appointed:- need 75% of shareholders to vote in favour of the Liquidation.
  • Appointment documents and declaration of Solvency are filed at Companies House, advertised in the London Gazette and all relevant parties are notified.
  • Following the Liquidator’s appointment the company bank account is closed with the funds being held in a client account held by the Liquidator.
  • Any remaining assets will be realised.
  • Once confirmation has been received that there are no company creditors or all creditors have been paid, an interim or final distribution will be made to the company shareholders.
  • Confirmation is received from HMRC that they have no matters outstanding.
  • If necessary a final distribution will be paid to the shareholders.
  • The Liquidator will prepare a final report, distribute to all members and file at Companies House, 3 months later the company will be dissolved at Companies House.

If you need any assistance or information regarding whether a MVL is right for you and your company then please speak to a member of our team on 0800 999 0666

HOW LONG DOES IT TAKE FOR MEMBERS TO RECEIVE THEIR FUNDS FROM THE LIQUIDATION?

The amount of time it takes to receive funds from a Members’ Voluntary Liquidation does vary depending on the case. As the process isn’t ‘one size fits all’, we can’t really give an exact timetable for the release of funds to members in a Members’ Voluntary Liquidation. It is fair to say, however, a first distribution can usually be made within 1 to 2 months if the funds are available and the balance paid when all procedures are completed.

HOW MUCH DOES A MEMBERS’ VOLUNTARY LIQUIDATION COST?

There are costs for a Members’ Voluntary Liquidation associated with appointing an insolvency practitioner as the liquidator for your company. Costs vary from case to case depending on the complexity of the situation and the assets that need to be liquidated. For a more accurate indication of what Members’ Voluntary Liquidation could cost your company, you can contact us at any time via telephone or email.

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