Often we hear of liquidation for insolvent companies, by forms of compulsory and/or creditors voluntary liquidation. However, there is a means and a process for liquidating a solvent company. Here we explain more.
So, this is known as a Member’s Voluntary Liquidation.
Ultimately, the directors and shareholders agree to wind up the company. This can happen if the company looses its purpose or perhaps the owner intends on retiring and has no one to take over the firm. The case may also be to benefit from tax benefits. No matter the reason, the key part here is that it is in the directors and shareholders’ intention and the company is able to meet current financial obligations, with no outstanding debt concerns.
The process?
- Directors sign a declaration of solvency
- Liquidators investigate the legitimacy of the declaration
- A General Meeting is conducted. Here the chosen liquidator is appointed
- Details of the appointment are shared with Companies House as well as published in The Gazette
- The liquidation process commences
- Assets are realised and distributed to shareholders
- The company is removed from the register at Companies House,
Alternatives to a MVL when wanting to close a solvent company?
The option here would be a striking off. This is a cheaper alternative and also quicker. You simply have to fill our a DS01 Form and submit this to Companies House. So long that no one objects the application, the company will be dissolved within 2 months. Note that for dissolution, there are certain requirements, as outlined here. Also, be aware of Bona Vacantia and how it applies.
Striking Off v MVL?
In all honesty, the two do the same thing, close down a solvent company. The difference lies in how much cash and how many assets the company has.
When a solvent company has little money in the bank and few assets, a striking off would be most suitable since it is quicker and cheaper.
However, if a company has a substantial amount of money to distribute among shareholders and has a good amount of assets, working with an insolvency practitioner on a MVL is best. Here you, as a director, have more control and involvement in distributing assets. Likewise, benefits come from Business Asset Disposal Relief of which can be benefitted from. This often leads to a hefty tax saving since it allows you to pay a reduced 10% rate of capital gains tax when selling, disposing of or closing your company.
So there you have it… liquidating a solvent company is possible. A MVL or a dissolution can be used. Call us today to find out more and discuss your options: 0800 9700539
