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Our company is solvent but we need to wind it up to take money out and take advantage of Entrepreneur's Relief - what is the solution?"

Members Voluntary Liquidation - MVL 

Members Voluntary Liquidation is a formal process used to close down a solvent company. The company's assets are turned into cash and then distributed to the members. It is a more cost effective than dissolving a company due to Entrepreneur's Relief, although these rules have recently been changed - see below. An MVL is carried out by a licensed insolvency practitioner.

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   Read our free expert's guide to Members Voluntary Liquidation (17 PAGE PDF)





What are the benefits of an MVL?

If you have a company that has cash, assets, few liabilities but no future purpose (so is otherwise solvent), then a members voluntary liquidation could be the best solution to your problem. As mentioned above, an MVL will allow you to take advantage of Entrepreneur's Relief. 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 to put the company into members voluntary liquidation rather than dissolution. 

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.

Important Notice

Be aware that the government has introduced 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

  1. The company is a closed company.
  2. Within two years after receiving a distribution the person is involved with a similar trade or activity.
  3. The winding up of the company appears to be to reduce tax.
In essence the tax rate can triple!  

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.
 

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 wish to retire and have cash, property, assets etc 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 is 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. If your business is insolvent, you should consider a company voluntary arrangement or creditors voluntary liquidation

    What does 'solvent' mean exactly? 

    It means the company can pay all 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 and the directors have to swear an affidavit that the company is solvent. 

    How do we arrange an MVL? 

    Call us and we will arrange for our licensed insolvency liquidators to talk you through the process and help prepare the paperwork. You will need to fill out a statutory declaration of solvency which is sworn in front of a solicitor. Our team will arrange all creditors meetings, correspondence and legal notices.


    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.

    How much does an MVL cost?

    In relatively simple situations, the total cost can start from £3000 + disbursements. However, it can be a complex process and will depend on the individual case. Give us a call and we can give you a no obligation estimate of the costs.

    Call us now on 08009700539 for more information and advice about members voluntary liquidations. We can arrange for the appropriate insolvency practitioner to call you free of charge to discuss your options. 

Have a look at our free guide to Members Voluntary Liquidation for an in-depth guide to the process. 

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