Members Voluntary Liquidation
- A Members Voluntary Liquidation (MVL) is a voluntary procedure to wind up the affairs of a solvent company. If your company has cash flow problems or creditors’ actions against it, then MVL is not for you.
- Solvent means that the company can pay all of its liabilities in full, plus statutory interest and the costs of liquidation within 12 months of the declaration of solvency being signed and sworn by the directors.
- Generally, an MVL is a tax efficient procedure to take money out of the company rather than taking it all as a dividend. It is always advisable to check this with your accountant first.
How MGA helps
- The MVL procedure is regulated by the Insolvency Act and Rules. At MGA we will systematically guide directors through the process to ensure the MVL is the appropriate procedure to meet the needs of your solvent company and its shareholders . For example when:-
–A company has come to the end of its useful life and needs to be wound up and the surplus assets distributed to shareholders.
–A company’s owners wish to retire and there is no natural succession. The MVL will facilitate the distribution of the company’s cash and property to shareholders.
–Under Section 110 of the Insolvency Act 1986, one or more businesses of a company in an MVL may be transferred to a new company, or companies, in return for shares in the new companies. The new shares are then distributed to the shareholders of the original company. This allows incompatible businesses or assets to be separated.
- MGA will help prepare all the requisite statutory documentation.
- MGA will help the board of directors complete a statutory declaration of solvency which is sworn in front of a solicitor . The directors’ declaration is sworn to confirm that the company is solvent and will pay all its liabilities within twelve months. If that is not achieved then the company will be deemed insolvent . By signing the declaration when the company is not solvent, the directors may be judged to have committed perjury. Hence the need to work meticulously together.
- MGA will agree a fixed fee for acting as liquidator which will be drawn from the company’s assets post liquidation. If the company is registered for VAT, the element of VAT of the fee and other costs can be reclaimed from HMRC, reducing the total cost to the shareholders.