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What is an MVL?
Members’ Voluntary Liquidation
Closing your company, paying off all debts and extracting the surplus funds in the most efficient way.
Benefits of an MVL
- Quickly unlock surplus cash
- Withdraw cash in the most tax efficient way (more so than salary or dividends)
- You could qualify for Business Asset Disposal Relief (formerly called Entrepreneur’s Relief) – your tax bill could be as low as 10%
What is an MVL?
A Members Voluntary Liquidation, or MVL, is a process that allows shareholders to appoint a liquidator in order to formally close down a solvent company. The liquidator will check all the company’s assets and make sure that there are no outstanding liabilities owed by the business. When this is done, a capital distribution will be paid to all the shareholders.
As a solvent company, there must be sufficient assets to repay all the creditors as well as funds to pay the shareholders. The MVL may be initiated by the directors of the company but it will also need the approval of 75% of the voting shareholders in order to pass.
There are multiple reasons why a company might choose to be placed into Members Voluntary Liquidation. Below we explore some of the most common.
- The directors or shareholders may want to retire, move overseas or revert to full time employment. IR35 has been a common cause for people to close their limited companies in recent years.
- A company may have served its useful purpose, for example an investment company or property holding company.
- The company is looking to bring an end to trading as shareholders require an appropriate exit strategy. As they may be able to obtain a tax-efficient release of their capital under Business Asset Disposal Relief (formerly Entrepreneurs Relief), and so the MVL could be more tax beneficial.
- Several shareholders are looking to split the company’s assets. Reorganisation through a Members Voluntary Liquidation might prove the best way to achieve this.
- It can be used as a tool to re-organise a group of companies, as it is an easy way of closing them down.
What is the Members Voluntary Liquidation Process?
Once you are happy that the Members Voluntary Liquidation (MVL) is the right process for you, we would initially just need your company name, contact name and email address for
- We will send our engagement letter and terms of business to you by email for e-signing and this will also include our invoice, which we ask is paid in full at this stage.
- We will invite you to access our online client portal where you will find a list of all the information that we will need, and you may begin to upload this for us to review.
- We have a team of staff who deal with the onboarding process for all clients, you will receive their contact details at this point so that they may support you through the process.
- We ask for all company tax returns up to the cessation of trade to be submitted and all liabilities to be paid before the company enters liquidation, including making any payments on account to HMRC. Once your company enters liquidation, creditors, including HMRC, can claim statutory interest at 8% per annum on any outstanding sums from the date of liquidation until the date of payment – even on sums due to HMRC that are not overdue at that time (and HMRC do claim this interest)
- We suggest at this point that you DO NOT send your surplus cash balance to us. Instead, we suggest that you transfer the funds directly from the company account to the bank accounts of the shareholders in the same ratio as the dividend rights. This transfer should be recorded on the final balance sheet as a directors loan. Once the company enters liquidation, we make an immediate distribution in specie of the loan account to clear it back to nil.
- As your information is uploaded to the client portal we will prepare the liquidation paperwork and agree a date with you for when the company will enter liquidation. The liquidation paperwork will be sent to you for e-signing. There is one exception to this, which is the Declaration of Solvency, which is a form of the final balance sheet which is registered at Companies House. This needs to be sworn in the presence of a solicitor by a majority of the directors. We will email the form to you and you will be able to engage with any solicitor of your choice. Alternatively, we do have solicitors who will provide a swearing meeting by video conference such as Zoom if required.
- Once the company is in liquidation, we will notify HMRC, the bank and any other parties required, including Companies House and we will also place the necessary adverts into the London Gazette. If there any remaining funds in your company bank account, these will be paid to you once we receive them from the bank.
- Once the company enters liquidation our onboarding team will hand over to one of our liquidations team who will manage your liquidation through to its closure.
- Within a few days of the liquidation starting, we will issue you with a letter detailing the distribution, including the date, total amount and amount per share. This information is what you will require for inputting on to your personal tax return. If you qualify and wish to claim Business Asset Disposal Relief (formerly called Entrepreneurs Relief) there is a box to tick on your personal tax return that will recalculate your tax at the new rate of 10%.
- After the distribution is made, we will need to await HMRC to provide tax clearance, which can take around 6 months. If we have any queries raised by HMRC such as missing returns or outstanding liabilities then of course we shall revert to you or your accountant to resolve any issues.
- We will file the final returns with Companies House to ensure your company is dissolved at the end of the process.
SimpleLiquidation.co.uk is a regulated insolvency practice
Our liquidators are authorised by the ICAEW (the Institute of Chartered Accountants in England and Wales) and members of the Insolvency Practitioners Association, and R3, the insolvency trade body.
We are not an intermediary, broker or sales company.