INSOLVENCY HELP​

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.

How does it 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

It's decision time. The shareholders come together to vote on whether to close the company through liquidation.

If most agree, the process moves forward. It's about making sure everyone's on the same page before taking the next step.

STEP 4

Next up, the creditors get a say. They're informed about the liquidation plan and given a chance to share their thoughts.

If there are no major objections, and everything is clear, we move on to wrapping things up in a way that's fair for everyone involved.

STEP 5

Once the appointment of the liquidator is confirmed, the Directors’ powers cease. Upon appointment, the Liquidator has certain statutory duties, such as providing notice of their appointment to the creditors, London Gazette, Companies House.

The Liquidator will deal with all company assets, trying to maximise realisations to creditors.

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.

It's a bit like gathering all your financial facts to give to the people your company owes money to. This step is all about transparency and setting the stage for what comes next.

STEP 3

It's decision time. The shareholders come together to vote on whether to close the company through liquidation.

If most agree, the process moves forward. It's about making sure everyone's on the same page before taking the next step.

STEP 4

Next up, the creditors get a say. They're informed about the liquidation plan and given a chance to share their thoughts. ​

If there are no major objections, and everything is clear, we move on to wrapping things up in a way that's fair for everyone involved.

STEP 5

Once the appointment of the liquidator is confirmed, the Directors’ powers cease. Upon appointment, the Liquidator has certain statutory duties, such as providing notice of their appointment to the creditors, London Gazette, Companies House.

The Liquidator will deal with all company assets, trying to maximise realisations to creditors.

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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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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As for the director’s involvement, the bulk of it will be in the first couple of months of the liquidation.

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