A Member’s Voluntary Liquidation (MVL) is a great way to unlock the investment in your business.
An MVL is tax efficient – where more than £25,000 is to be distributed to shareholders.
Cost effective – starting as low as £1,495 plus VAT & disbursements.
Quick cash release subject to shareholders indemnity we don’t have to wait for HMRC clearance!
We will aim to distribute funds to you within 7 days of receipt of your cleared funds.
No need for a face-to-face meeting. Everything can be done over email and phone.
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WHAT IS A MEMBERS VOLUNTARY LIQUIDATION (MVL)?
A Members Voluntary Liquidation is the liquidation of a solvent company. A company is solvent by definition, if it can settle all of its liabilities in full and its statutory interest within 12 months.
A director may look to enter into an MVL, as they wish to withdraw their investment within the company in the most tax-efficient manner possible, or because it has no further purpose.
Business Asset Disposal Relief
As of 6th April 2020, Entrepreneur’s Relief became known as Business Asset Disposal Relief (BADR). Companies with cash to be released via an MVL, may qualify for BADR if certain criteria are met. Assets are sold, creditors and liquidators are paid in full, and any remaining monies will be distributed to creditors.
WHEN YOU COULD USE THE MVL PROCESS
Directors may be looking to close a company due to, but not limited to the reasons below:
- Shareholders want to close the business or retire, and transfer the desired funds into a private estate.
- The directors want to close the company and take their money out in the most tax-efficient manner, via BADR.
- In the case of established family businesses, where owners want to retire, but their family don’t want to run the business, an MVL would allow the company to be formally wound up.
- A group of companies may need reorganisation after a merger, or if there’s a need to increase efficiency. This could require more than one MVL. However, we can advise on this.
- Finalising all tax affairs for a single or group of companies. The reorganisation of a company’s merger may help increase efficiency.
What are the advantages?
An MVL has many advantages allowing you to close a company in the most tax-efficient way.
Following the Enactment of Extra Statutory Concessions order 2012 (ESC Order), an MVL can be used where cash from the company is set to be distributed to shareholders. This avoids the imposition of income tax, which would arise if the company were to go through a dissolution.
- Quick cash release
Subject to shareholder’s indemnity, we don’t have to wait for HMRC clearance.
- Fast distribution
We aim to distribute funds to you within seven days of receipt of your cash from the company’s bank.
What are the disadvantages
A Members Voluntary Liquidation does come with a greater upfront fee to pay than a simple dissolution. However, simply dissolving the company does not have the tax benefits afforded by entering into an MVL. In this situation, the benefits outweigh the costs.
Our costing for an MVL is based on a four-tiered system, designed to suit the individual requirements of each company. The cost is split into two sections, the liquidator fees, which involves all of the work carried out by our insolvency practitioner. The second part, involves the expenses which are a mandatory part of the MVL process.
£1,695 MVL + VAT & expenses
This is for a straight-forward MVL where the company has no outstanding liabilities, and all assets have been turned into cash.
£1,995 + VAT & expenses
If the liquidation of your company is more complex and there are outstanding liabilities, or assets to be distributed in specie;
£2,495 + VAT & expenses
If you are due any HMRC refunds the fee for an MVL would be £2,495
Bespoke MVL + VAT & expenses
With our bespoke MVL, we will carry out the valuation and sale of any physical assets and deal with any disputed creditor claims against the company. We also offer a free face-to-face meeting with one of our consultants, as well as providing constant support and guidance throughout the process.
Our MVL procedure.
Upon receipt of your enquiry we will issue an engagement pack.
- Discuss timescales & Declaration of Solvency
Once returned we will contact you to discuss the completion of the Declaration of Solvency. This is a principal requirement for any company wanting to propose an MVL. The declaration states that enquiries have been made into the company’s financial affairs and the directors are of the opinion that the company will be able to repay its debts, plus statutory interest within twelve months.
- Board meeting
Any director making a Declaration of Solvency without having reasonable grounds for the opinion that the company will be able to pay its debts in full, together with interest at the official rate, within 12 months is liable to imprisonment or a fine, or both. You will need to attend a local solicitor’s office to have this sworn (they may charge for this, typically £20). When sworn return this to us. This document must be made up to a date no more than 5 weeks before the company enters liquidation and must be made by the directors (or by a majority where there are more than 2), and they must hold a meeting to pass a resolution to officially begin the winding up process.
- Provision of information
You will be required to provide copies of all accounts and returns that should be prepared up to the date of liquidation for submission to HMRC, including the submission of final VAT, PAYE and any subcontractor returns, together with evidence of final payments made prior to the appointment of the liquidators.
We will prepare all of the statutory minutes, notices and resolutions. We will also check your company’s memorandum and articles to ensure compliance with notice periods and voting rights.
- Following appointment
Once appointed we will file the Declaration of Solvency and resolutions confirming the appointment of the liquidators at Companies House. We will also advertise the appointment in the London Gazette and advertise for creditors to submit claims. Even though there will be no creditors, it is best practice still to advertise.
- Write to your bank
We will request the company’s cash at bank and make a distribution within 7 days of receipt of the cash in accordance with the company’s memorandum and articles.
- Distribute cash
The time frame of this will depend wholly upon when we receive money from your bank. All banks are different in terms of how quickly they will release the funds to the liquidators. We will use our best endeavours to secure the release of the monies as soon as possible but please note that the bank’s own framework may mean that funds are not released as quickly as you would like. If your company is/has been VAT registered, we will reclaim the VAT on the costs incurred and make a second and final distribution towards the end of the liquidation.
We will also require a written indemnity as part of the engagement letter to provide the liquidator with sufficient security should any claims arise. As long as all liabilities have been paid prior to appointment then the liquidator will have no cause to rely upon the indemnity.
For solvent limited companies with cash and assets to distribute, an MVL will be the most tax-efficient way of withdrawing money from the company and liquidating it. As long as the company is able to pay all of its liabilities, this will be the best procedure for the business.
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