Members’ Voluntary (solvent) Liquidations (MVL)

A Members’ Voluntary Liquidation, or MVL, involves the voluntary liquidation of a solvent company by its shareholders.

An MVL is a positive step – What is an MVL?

A Members’ Voluntary Liquidation, or MVL, involves the voluntary liquidation of a solvent company by its shareholders.

Unlike a Creditors’ Voluntary Liquidation (CVL), the cash and assets coming from the liquidation go to the company’s members rather than its creditors.

An MVL is a tax efficient means of closing your solvent company and unlocking the capital

Benefits of an MVL

The benefits to shareholders of winding up a company in a solvent liquidation are attractive due to the difference in rates between Capital Gains Tax and Income Tax along with Entrepreneurs Relief. Instead of the higher rate taxpayer paying 40% to 50% on a distribution of assets, with an MVL assets can be distributed and capital gains tax rates will apply at 18% or 28%, plus the costs of the liquidation. The MVL will:

• Return surplus assets in a tax efficient manner to shareholders
• Reduce risk to directors
• Save accounting and audit fees
• Save management time in preparing statutory returns and compliance information
• Improve transparency by simplifying complex and unwieldy structures thereby enhancing investor perception

When to use an MVL

• Are you (or your clients) planning to make distributions of more than £25,000 to shareholders?
• Can the shareholders claim reliefs allowing them to pay 10% tax?
• Is the company nearing the end of its life?
• Recent changes in tax legislation have caused you or your clients to complete a corporate structure check-up, as having many corporate vehicles is no longer tax beneficial

The process

• The Company must be solvent (able to pay all of their debts in full) and a meeting of directors is held where they swear a statutory declaration of solvency.
• A meeting of shareholders is held to pass resolutions to put the company into liquidation
• The liquidator will review the company's books and records looking for any liabilities, will close any bank accounts and realise all assets
• All creditors' claims will be agreed and paid in full (with statutory interest). Any surplus assets will be distributed to shareholders
• Corporation tax, PAYE & NIC and VAT compliance will be concluded - with all clearances received before closure of the liquidation
• A final meeting is held to close the liquidation and dissolution of the company is approximately three months later.

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