Members Voluntary Liquidation - MVL - A Guide to Solvent Liquidation
Got a company that has cash, assets, few liabilities and no future purpose so is otherwise solvent? Then a members voluntary liquidation (MVL) could be the most cost effective solution to your problem. Since March 2012, the ESC C16 (Extra Statutory Concession C16) is no longer a requirement when closing a company. So, if you have in excess of £25k in an obsolete company to be taxed on shareholders via capital gains tax (CGT) instead of dividends, you need a formal members voluntary liquidation rather than just dissolving the company. This will allow you to take advantage of Entrepreneur's Relief.
If the company has cash or properties that can be turned into cash then a solvent liquidation can be used to distribute the liquid assets to shareholders or distributed "in specie" (NB subject to personal taxation depending upon an individuals circumstances). The company can then be dissolved and directors' obligations removed.
Be aware that the government will introduce new rules in April 2016.
Distributions to individuals from the solvent liquidation of a company may be subject to income tax under the following circumstances
- The company is a closed company.
- Within two years after receiving a distribution the person is involved with a similar trade or activity.
- The winding up of the company appears to be to reduce tax.
This is aimed at serial liquidators who are taking advantage of entrepreneur's relief by accumulating funds in companies and taking the money out as capital rather than income. However anyone can be caught out in the new tax. So hurry.
Call us now for a Members Voluntary Liquidation - 08009700539
What is an MVL?
An MVL is a voluntary procedure to wind up the affairs of a SOLVENT company. If your company has cash flow problems or creditor's actions against it, then this is not for you!! You need to consider options like company voluntary arrangement, administration or creditors voluntary liquidation (for insolvent companies).
It means that the company can pay all of its liabilities in full, plus statutory interest AND the liquidation costs involved in winding up the company, within 12 months of the declaration of solvency. This statutory declaration is required as part of the MVL process, the directors have to swear that the company is solvent and can pay all of its liabilities in full, plus statutory interest AND the liquidation costs involved in winding up the company.
Call us and we will arrange for our licensed insolvency liquidators to call you and talk you through the process and help prepare the paperwork. Then you fill out a statutory declaration of solvency which is sworn in front of a solicitor. They will arrange everything else like creditors and legal notices, the meetings and guide you as directors and or shareholders.You can get on with your life while they take care of the legal issues and then they will issue payments to shareholders in due course.
What exactly is involved and how much does it cost?
In order to get an MVL underway, you will need to have completed the following;
- File the latest set of accounts up to the date the business has ceased trading
- Sell any remaining assets of the business
- De-register for VAT
- De-register as an employer
- Collect in any monies owed to the business
- Ensure all liabilities paid.
When is the MVL procedure appropriate?
The Members Voluntary Liquidation procedure is appropriate when a solvent company has come to the end of its useful life and needs to be wound up. For example:
- When a company is an old established family business where the owners/parents have retired and children or family do not want to run the business.
- Shareholders want to retire and have cash and a property within the company which they want to transfer into their personal estate.
- Where a rationalisation of a group of companies is required; this may involve more than one MVL or a transfer to trading companies within the group.
- Now with the new provisions of entrepreneur's relief, it is also more tax efficient to take money out of the company via an MVL rather than taking it all out as a special dividend in most cases. It always worth checking this with your accountant first.
Remember, it is NOT appropriate if the company is insolvent. If this is the case and you swear the declaration of solvency, you could be committing a criminal offence.
So call us on 08009700539 and we can will arrange for the appropriate insolvency practitioner for your circumstances to call you free of charge.
Have a look at our free guide to Members Voluntary Liquidation for an in-depth guide to the process.