What is a Members’ Voluntary Liquidation (MVL)
Understanding a Members’ Voluntary Liquidation
A Members’ Voluntary Liquidation is a formal company liquidation process for companies that are solvent and therefore, must be able to meet company liabilities within 12 months of the liquidation process starting. If the company is insolvent, a Creditors’ Voluntary Liquidation (CVL) may be more appropriate, or company strike off (dissolution) if the company has no cash or assets.
An MVL is best suited to businesses with retained profits over £25,000 to be cost-effective. This route is often used to dispose of a redundant business, or because the circumstances of the director have changed, such as retirement, a new venture, or personal health.
An MVL is a popular closure method for cash-rich businesses due to the associated tax advantages, however, the guidelines are strict. A licensed insolvency practitioner can advise on whether an MVL is suitable, what happens during a Members’ Voluntary Liquidation, the timeline and tax treatment.
What happens during a Members’ Voluntary Liquidation?
Licensed insolvency practitioners appointed – A letter of engagement is signed, formally appointing a licensed insolvency practitioner to act as liquidator and advise you throughout the Members’ Voluntary Liquidation process.
Declaration of solvency signed – The declaration of insolvency is a legal document that must be signed to testify that your business is solvent, and therefore, able to settle liabilities in full within 12 months of the liquidation commencing, including interest, with enough funds remaining.
General meeting of shareholders held – A general meeting is held to allow shareholders to vote in favour or against the Members’ Voluntary Liquidation proposal. If 75% of shareholders vote in favour of the MVL, the insolvency practitioner takes control of the company, and the liquidation process commences.
Company liquidation commences – The company enters Members’ Voluntary Liquidation, the relevant documents are prepared and submitted, and parties are notified, such as HMRC and Companies House. The liquidation is advertised in the Gazette, making it a matter of public record and creditors are invited to submit their claims at this stage.
Funds distributed – Once confirmation is received that the company has no outstanding liabilities, capital distributions are made to shareholders, and the company is closed and removed from the Companies House register after three months.
What is the tax treatment in an MVL?
Distributions made through an MVL are treated as capital, rather than income and, therefore, subject to Capital Gains Tax, rather than Income Tax. This means that less tax is deducted, and funds can be extracted in a tax-efficient manner.
You may also qualify for Business Asset Disposal Relief (BADR), previously Entrepreneurs’ Relief, a tax advantage when selling, disposing, or closing a business. This form of tax relief reduces your tax liability as you pay a 10% flat rate of Capital Gains Tax on qualifying gains, for which the lifetime limit is £1 million.
Business Asset Disposal Relief is currently under the spotlight as it may change under potential future tax reforms. If you wish to close a solvent and profit-rich business, get in touch with our MVL experts to understand your tax position and the process for liquidating your company tax efficiently.
How much does an MVL cost?
An MVL costs more than company strike off as the process is complex and must be handled by a licensed insolvency practitioner due to the high value of funds. The cost is often offset by the tax savings made through an MVL, making it a worthwhile investment.
In addition to the insolvency practitioner’s fee, you must pay disbursement costs and a bond fee. Disbursements cover the cost of legal notices, such as adverts placed in the Gazette, advertising your intention to close the business. A bond is also required to protect the funds handled by the insolvency practitioner during the MVL process. The cost of the bond is determined by the value of the funds and differs between bond providers.
When searching for an MVL provider, appointing a reputable and experienced insolvency practitioner is essential. The insolvency practitioner is responsible for acting as the liquidator, distributing funds to shareholders, closing the company in an orderly and compliant manner and functioning as the main point of contact throughout the process.
The insolvency industry is concentrated with company liquidation providers that promise results for a heavily reduced fee – be cautious and only engage with trusted and qualified insolvency practitioners. At Solvent Liquidations, speak with a licensed insolvency practitioner from the get-go, and as the UK’s largest company liquidations provider, rest assured – you’re in trusted hands.
How can Solvent Liquidations help limited company directors?
At Solvent Liquidations, we believe that closing a solvent business should be an expertly managed, stress-free process that guarantees the quick distribution of funds and a tax-efficient exit. Our team of licensed insolvency practitioners and company liquidation specialists are all you need to close a solvent company efficiently and with ease. We are the UK’s number one provider of company liquidation services and are trusted by company directors nationwide.
Fixed Fee Service –
Free Initial Consultation
To liquidate a solvent company and release cash quickly, explore our fixed-fee Members’ Voluntary Liquidation service. Book a free initial consultation.
Accountant with Clients? We Can Support You
We partner with accountants to streamline MVLs for their clients. If you have solvent businesses seeking a tax-efficient exit strategy, our expertise in Members’ Voluntary Liquidations can deliver seamless solutions – Explore Our MVL Services
25,000+ Company Directors Supported – Partner Led Service
As the UK’s largest company liquidations provider, our MVL specialists have 35 years’ experience and a track record of supporting over 25,000 directors and counting. With unparalleled sector expertise and a highly experienced partner-led team, we are market leaders.
Solvent Liquidation made a complex process feel simple. Their expertise and support throughout my MVL ensured a stress-free and positive outcome.
Sarah Thompson
The team at Solvent Liquidation were incredibly professional and efficient. They handled my MVL with care, making the entire experience straightforward.
James Patel
I highly recommend Solvent Liquidation. Their clear guidance and knowledge made my MVL process smooth and successful. A fantastic service!
Oliver Williams