Members’ Voluntary Liquidation

Members’ voluntary liquidation enables you to wind up your solvent company, sell its assets and distribute the proceeds among shareholders in a highly tax-efficient manner. A major advantage of MVLs is that funds are classed as capital rather than income, even if they exceed the normal limit of £25,000 for capital distributions and are therefore taxed at a lower rate. Business Asset Disposal Relief is also available and reduces the tax rate to just 10%.

As a formal legal process, members’ voluntary liquidation must be managed by an insolvency practitioner. MVLs maximise funds for shareholders while minimising the risk to directors, as the IP ensures the procedure is carried out in a lawful, orderly fashion.

Our licensed insolvency practitioners have extensive experience of liquidating UK businesses. We can help you decide if members’ voluntary liquidation is right for your company and manage the entire process for you. Call us today on 0800 254 5122.

Why Place a Company in MVL?

There are many reasons to place a company in members’ voluntary liquidation. Perhaps you’re retiring or emigrating. Perhaps you’ve been working as a contractor and now wish to be an employee instead. Perhaps your company has fulfilled its purpose. Perhaps it’s part of a group of companies and has been earmarked for closure due to restructuring. Perhaps you want to fund a new business venture.

(Bear in mind that although MVLs offer tax savings, your main reason for arranging one mustn’t be to pay as little tax as possible. That could constitute tax avoidance.)

How Members’ Voluntary Liquidation Works

Members’ voluntary liquidation involves appointing your chosen insolvency practitioner as liquidator. The liquidator assumes control of the business and strives to extract the maximum value from it when selling the assets.

Each shareholder receives a portion of the proceeds, and ultimately the firm ceases to exist.

MVL Eligibility Criteria

To be eligible for members’ voluntary liquidation your company must:

• Be solvent
• Be able to settle any debts and contingent liabilities
• Have no outstanding legal action
• Not have changed name in the past three months

Members’ Voluntary Liquidation Process

1. Having decided to wind up their company, the directors consult an insolvency practitioner to confirm that members’ voluntary liquidation is suitable. They and the IP ensure financial records are in order and create a clear picture of the current state of the business.
2. The directors sign and swear to a Declaration of Solvency in the presence of a solicitor. The document states that the company will be able to pay its debts and contingent liabilities, including interest, within 12 months.
3. The IP and directors inform shareholders about their intention to liquidate the firm and how funds will be distributed. Shareholders vote on a winding-up resolution. If 75% (by share value) support the resolution, the MVL is implemented and IP appointed as liquidator.
4. The liquidator advertises the members’ voluntary liquidation in The Gazette in case any creditors wish to come forward. The assets are valued and sold. Debts and fees are paid, then the remaining funds are divided proportionally among the shareholders.
5. The liquidator seeks HMRC’s approval to close the company down and asks Companies House to remove it from its register.

Members’ Voluntary Liquidation Benefits

• Directors choose when the process begins
• Handled by a liquidation expert to ensure legal compliance
• Unlocks as much money as possible for shareholders
• Significant tax savings when companies have over £25,000 to distribute
• No damage to your reputation – you’re liquidating a solvent business

Members’ Voluntary Liquidation FAQs

What happens to directors in members’ voluntary liquidation?

Directors give control of the company to the liquidator. They assist with the MVL and attend a fact-gathering interview conducted by the liquidator.

How long does an MVL last?

Members’ voluntary liquidation is usually completed in six to twelve months. Repaying creditors beforehand can speed up the process.

How much does members’ voluntary liquidation cost?

Although the exact cost depends on factors such as the number of assets, MVL fees are typically in the region of £4,000 and can be offset by tax savings.

What’s the difference between MVL and CVL?

Members’ voluntary liquidation is only for solvent companies and focuses on distributing funds among shareholders. By contrast, creditors’ voluntary liquidation is only for insolvent companies and focuses on repaying creditors. If a company becomes insolvent, its MVL may be converted into a CVL.

Where can I read more about MVLs?

Please see our complete guide to members’ voluntary liquidation.

MVLs from UK Liquidation Experts

If you’re ready to wind up your solvent company while maximising its value, an MVL carried out by one of our experienced liquidators could be ideal.

Need members’ voluntary liquidation advice? Contact Irwin Insolvency today.