Members Voluntary Liquidation

Members voluntary liquidation process

Members voluntary liquidation - out with the old, in with the new

There comes a moment in every person’s life where a certain chapter needs to be closed, and the business world makes no exception from this rule. No matter how big or how successful a business is, you may have reached the point where it does not represent you anymore and you are looking forward to what the future will bring. What can you do in this scenario in order to close down one old chapter and start a new one afresh?

When it comes to winding down a company, there are various methods available, one of which is Members’ Voluntary Liquidation, known as MVL. This process offers several advantages, making it a useful strategy for those looking to close their business in an orderly and tax-efficient manner. Unlike other measures like Creditors Voluntary Liquidation, the MVL liquidation is a legal process designed for solvent companies.

MVL – the option that will help you make one of the most important decisions

One of the primary benefits of MVL in a company is its tax efficiency. When a company undergoes a MVL , shareholders have the opportunity to take advantage of capital gains tax rates, which are typically lower than income tax rates. This can result in substantial tax savings, especially for shareholders with significant ownership stakes in the company. Additionally, it allows for the distribution of assets in a tax-efficient manner, maximizing the return to shareholders.

Insolvencyhelp.co.uk is the platform that has prepared to offer you more details about Company Voluntary Agreement and also about Members Voluntary Liquidation (MVL) in London. Closing down a business, especially one that has had a great run over time, is a really important decision that should be made with the help of a licensed professional. MVL and the other programs provide a responsible and organized way to bring a business to an end, so you and the other shareholders can focus solely on the future.

Straightforward process

How does a MVL work?

Step 1

The Directors approach an Insolvency Practitioners’ firm to discuss the available options for the Company. After reviewing the Company’s financial situation, the Board of Directors will hold a meeting to instruct an IP to assist with placing the Company into MVL.

Step 2

A Declaration of Solvency will be prepared, and it will be sworn by Directors in front of a solicitor. If a Company has one director, the Director will be the only one signing. If a Company has two directors, both Directors will swear and sign the Declaration. If there are three or more directors, a majority of them will sign and swear the Declaration. A Declaration od Solvency in which the Directors confirm they are of the opinion that the Company is able to pay all its debts and interest within 12 months of the appointment. The Declaration of Solvency needs to be signed at least five weeks before the company entering MVL. It is necessary to submit all statutory returns to HM Revenue & Customs up to the date of appointment.

Step 3

A General Meeting of Members will be called in order to pass the following 4 resolutions:
- A special resolution to wind up the Company
- An ordinary resolution to appoint a Liquidator
- An ordinary resolution to agree the basis of the Liquidator’s fees
- A special resolution to agree to a Distribution in Specie.

Step 4

Following the passing of the winding up resolution, the Declaration of Solvency will be filled at Companies House within 15 days of the passing of the special resolution, in order to give notice of the MVL process. The resolutions must be advertised in the London Gazette within 14 days of the General Meeting of Members. This means the Company has entered into Members’ Voluntary Liquidation and that a Liquidator has appointed. Notice of the Liquidator’s appointment will be sent to the Company’s members and all known creditors within 28 days of the appointment.

Step 5

Once all assets of the Company have been realised and clearance has been received from HMRC, the Liquidator will proceed with declaring a distribution to the Company’s members. Upon finalising the distribution, the Liquidator will issue their final report to creditors and vacate office. Usually, a MVL takes no longer than one year.

How long does a MVL take?

A member’s voluntary liquidation is a process that takes a few months to finalize by your insolvency help team. After the company is placed into liquidation and the assets will be distributed to the shareholders.

All creditors must be paid in full prior to the liquidation and the director must submit the Declaration of Solvency, a document confirms that the company is solvent and there are no creditors left unpaid.

How much does a MVL Cost?

The market’s average for a standard MVL -Member’s Voluntary Liquidation is £4,000.00 + VAT.

This is just a standard fee, and the price can differ from case to case.

Things like the number of shareholders, the total amount of assets etc. can influence the price.

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You might have heard terms like liquidation, company administration, insolvency practitioner, and many more. But what do they mean and what might be the best insolvency procedure for your company?

LIQUIDATION (CVL)

Creditors Voluntary Liquidation is a legal process in which an insolvent company is wound up. The appointed Liquidator will try to realise assets (by recovering the assets from 3rd parties, selling the Company’s assets for the best price, etc) to repay the Company’s debts. During the Liquidation process, the Company is under the Liquidator’s control and it will be dissolved by the end of the liquidation process

ADMINISTRATION
An Administration is a formal insolvency procedure in which an Insolvency Practitioner is appointed to act as an Administrator with the goal of rescuing the business and obtain the best result for the Company’s creditors
CVA​

When a struggling business appears to be viable with the prospect of becoming profitable again, and the directors are willing to continue, a company voluntary arrangement (CVA) may be an ideal way to protect against legal actions.

Important things you should know
Questions And Answers about a Members' voluntary liquidation (MVL)

After consulting with our Insolvency Practitioners and once you have decided the MVL route is open for your company, you or the Company’s management need to make sure that all financial information of the Company is up to date and that reflects the Company’s current financial position. You will be using this information when preparing the Declaration of Solvency.

Usually, an interim distribution will take place shortly after the passing the winding up resolutions to place the Company into MVL. The percentage of the interim distribution depends from case to case, but it is usually around 80% of the assets.

Although the initial opinion was that the Company was able to pay its debts in full plus interest as per the signed Declaration of Solvency, in certain situation, this can change. For example, a claim is received from a creditor and the Company is not able to settle this claim. In this case, the Company is insolvent and the Liquidator will arrange for the Company to be converted from a MVL to a CVL.

As soon as all financial documentation of the company is provided, the Liquidators and their team will draft the necessary documentation to place the Company into MVL. Once the Directors hold the Board of Directors’ Meeting, the Declaration of Solvency is signed and the shareholders’ resolutions to wind up the company are passed, the liquidation will be effective.

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