Solvent Liquidation Services For Directors

Members’ Voluntary Liquidation (MVL) is a process used to close a solvent company, meaning it can pay all its debts. During MVL, the company’s assets are sold off, and any remaining funds are distributed to the shareholders. It’s a voluntary decision made by the company’s directors and approved by its shareholders to wind up the company’s affairs in an orderly manner.

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.

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.

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.