What is a members' voluntary lqiuidation? ('MVL')

It is an insolvency process for solvent companies to wind up their affairs and distribute funds tax efficiently to shareholders.  Done properly it brings complete finality such that any unknown creditors that might try to claim late and cannot disturb any distributions already made to shareholders.  The money paid out to shareholders counts as capital gains and not income which means the funds left in the company are taxed at a lower rate.

In more detail

An members’ voluntary liquidation needs a Licensed Insolvency Practitioner like us to be the liquidator.  The terms ‘members’ means ‘shareholders’ so it is liquidation driven by the owners of the shares.  Usually the proposed liquidator will prepare all the statutory paperwork and meet or discuss the process with the directors/shareholders.  A fixed pay is usually agreed in advance for the liquidation.

Statutory Declaration of Solvency

An MVL should only be used where all creditors have been paid in full or will be paid in full within 12 months from the date of liquidation.   The liquidator will ask the directors to sign a statutory Declaration of Solvency and warn them that it can be a criminal offence to sign a declaration knowing that creditors cannot be paid out in full within 12 months including statutory interest.

Important issues

The important issues for directors to consider for an MVL are:

  • Getting an accurate, up to date balance sheet showing all the assets and liabilities.  This is needed for the statement of affairs.
  • Having available all the names and addresses for shareholders (the members).
  • To reduce the liquidator’s costs it is advisable to have the company in as simple a form as possible.  This means having collected in all the assets and sold them, laid off staff and paid out creditors (suppliers) where possible.

Remember

It is a criminal offence for directors to sign a declaration of solvency knowing that they cannot pay creditors in full within a 12 month period.

If you would like to know about members’ voluntary liquidations contact us today on 0800 331 7417 or complete the form below.

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