A company liquidation can be a traumatic process, especially for the directors and shareholders involved. However, the closure of a business doesn’t have to be an insolvency process and there are options available for solvent businesses that allow them to close down their businesses on a clean, controlled basis. One such option is a members voluntary liquidation or MVL. This is a process that allows shareholders to close down the company they own and distribute assets as capital rather than income, thereby incurring favourable personal tax rates.
Using an MVL can be a very beneficial process for a number of different reasons, most commonly as part of a business simplification or reorganisation. It can also be a useful tool for company directors and shareholders who are moving overseas, returning to full-time employment (in the case of IR35 companies), or even simply changing their own business structure in order to take advantage of the tax advantages offered by an MVL.
The first step in an MVL is for the company’s directors to resolve members voluntary liquidation or MVL to call a meeting of the company members to wind up the company. A declaration of solvency must be lodged before this can take place, and this is designed to ensure that the company is solvent enough to pay all debts in full within 12 months of winding up.
Once a meeting has taken place and a liquidator is selected, the process will begin in earnest. The chosen liquidator will catalogue all of the company’s assets and work to ensure that any shortfall is addressed. Once all of the shortfalls have been addressed, all remaining funds will be distributed to company shareholders as a capital distribution. Typically, this will happen within 28 days of the resolution being passed.
As this is a very sensitive and detailed process, it’s vital that you work with a trusted insolvency practitioner to ensure you can get the best results from your MVL. At Real Business Rescue we offer a partner-led service and our insolvency practitioners will be on hand to guide you through the entire process and provide expert advice to ensure your MVL is a success.
MVLs can take up to six months to a year to complete, and it’s important that this process is only started once you are ready and that all documents have been put in place beforehand. Working with an insolvency practitioner in advance will help to speed up the process and help you avoid any unnecessary delays that could jeopardise your chances of a smooth and successful liquidation.
If you are in serious financial trouble and your company is entering an MVL, we would recommend that you seek expert advice as soon as possible. Our team of insolvency practitioners are here to support you through your MVL and will ensure that all documentation is in place and is completed correctly to enable the process to be as smooth as possible for all parties. Contact us today to see how we can assist you.
