Business asset liquidation
A Members Voluntary Liquidation (MVL) is a voluntary liquidation process where only an option for solvent companies. This means the company must hold enough assets to be able to settle all liabilities and interest in full within 12 months.
An MVL often comes about if:
- The company has fulfilled its purpose
- Company directors wish to retire or no longer want to manage the firm
- The business is solvent but not making profit (solvent liquidation)
- A merger is taking place
- Directors and shareholders are no longer willing to work together
- Directors and shareholders want to close the business and distribute money in a tax-efficient way. (business liquidation)
What do I have to do?
You will be asked to produce a schedule of all assets and liabilities. This is known as a Declaration of Solvency.
You and your fellow directors will then have to pass resolutions at a Board meeting and the members (shareholders) will attend an Extraordinary General Meeting
At this point, the company would cease trading if it had not already done so.
Directors consult Licensed insolvency practitioner
Calling of meetings Notice and proxy forms sent to shareholders and creditors
Shareholders’ meeting Extraordinary resolution to wind up and an ordinary resolution to appoint a liquidator
Declaration of solvency Statement of assets and liabilities
Shareholders’ nominee Remains as liquidator
Duties of liquidator Realise assets.
Agree creditors’ claims and distribute funds.
Distribute funds to shareholders.
Report to shareholders.
Call final members’ meeting.
Shareholders can potentially take advantage of Entrepreneurs Relief laws that could reduce the tax rate charged on any distribution by the liquidator down to 10%.
An MVL is a fairly straightforward process – the company winds down its business, creditor liabilities are settled and any remaining funds are distributed amongst the shareholders.