Members Voluntary Liquidation (MVL)
A Members Voluntary Liquidation (MVL) allows shareholders to appoint a Liquidator to close a solvent company. As soon as the liquidator realises the company’s assets and pays all remaining creditors and debts. The liquidator immediately pays a capital distribution to shareholders, either in species or from other assets in the company.
A solvent limited company must be distinguished from insolvent limited companies, as there will be sufficient assets to repay all creditors and distribute to the company’s shareholders.
While the company’s Directors initiate a Members Voluntary Liquidation, it still requires 75% of shareholders to give notice of members’ meetings to pass the winding-up resolution.
Obtain professional, experienced advice on MVL’s from our team.
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How long does a Members’ Voluntary Liquidation take?
The actual liquidation time will vary depending on the complexity of your company’s financial circumstances.
Our priority at HBG Advisory is to manage the MVL as quickly as possible. We request clients sign ‘deed of indemnity’ to aid the process to enable almost instant payout in part.
The remaining balance depends on how long HMRC takes.
Why consider a Members Voluntary Liquidation?
Here are the reasons why directors might place a company into Members Voluntary Liquidation:
The company is seeking to cease trade. Shareholders can exit their company in a tax-efficient way through entrepreneurial relief. However, the distribution as capital via an MVL may offer more favourable tax benefits than distribution through income tax.
Shareholders may consider splitting the company’s assets, and a section 110 IA86 reorganisation through Members Voluntary Liquidation may facilitate this.
The directors or shareholders of the company may wish to retire, move abroad, or are an IR35 company no longer required due to relocation or full-time employment.
A members voluntary liquidation could be used to reorganise a group of companies. If, for example, a subsidiary is no longer required or may have become dormant, this is a way to close it.
Tax Benefits of an MVL?
There are several tax benefits of the member’s voluntary liquidation. The first is that shareholder distribution is treated as capital distributions, thereby lowering tax rates than conventional dividends.
Members Voluntary Liquidation (MVL) and Entrepreneurs Relief
MVL distributions may qualify for Entrepreneurs Relief. It may offer a lower tax burden through reduced Capital Gains Tax of 10% on company qualifying assets.
We recommend you contact us to consider the potential tax implications of voluntary liquidation for your business.
What is the contrast between an MVL and a CVL?
MVL’s provide shareholders of a solvent company with a way to liquidate. A CVL is adopted when a limited company is insolvent. The directors opt to liquidate voluntarily, rather than face compulsory liquidation.
What is the Members Voluntary Liquidation Process?
- Hold board of directors’ meeting;
- Directors signs a declaration of solvency of the company;
- Carry out a company shareholders meeting;
- The company enters liquidation;
- Sign the ‘Deed of Indemnity’;
- Conversion of an MVL into a CVL;
- Hold a final meeting.
Costs to carry out a Members Voluntary Liquidation?
- Liquidators Fee – This depends on how complex the case is? At HBG Advisory, our fees start at £995 + VAT.
- HBG Advisory provides clients with Fixed Price MVL;
- Disbursements – four separate notices in the Gazette (costing £60 + VAT each), and a bond, of approx £200.