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MEMBERS’ VOLUNTARY LIQUIDATION SUPPORT

If you’re a business owner looking to close your solvent company in an efficient and tax-effective manner, Members’ Voluntary Liquidations (MVL) could be the ideal solution. Regardless of whether you’re looking to restructure, retire, or simply wind down operations, our experienced team of is here to help guide you through uncertain times with clarity and confidence.

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What is a Members’ Voluntary Liquidation?

A MVL is a formal process to voluntarily shut down a solvent business. Unlike many other types of liquidation, such as compulsory liquidation or a Creditors’ Voluntary Liquidation, a Members’ Voluntary Liquidation will be initiated by the company’s directors. The reason behind this can vary, but it usually boils down to a want or need to distribute the company’s assets amongst its shareholders — be this as part of a planned exit from the business or a restructure. 

Members’ Voluntary Liquidations allow for an orderly means of winding down your company’s affairs on your terms. All assets during the process will be sold off and used to first pay back any existing creditors, before then distributing any remaining funds amongst shareholders. 

A particularly popular liquidation method amongst business owners looking to properly tax-plan for the future, a Members’ Voluntary Liquidation allows shareholders to utilise tax relief such as Business Asset Disposal Relief, while retaining maximum control over your own situation.

Members’ Voluntary Liquidation vs Strike Off

Members’ Voluntary Liquidations and strike-offs are two of the most common methods for closing a limited company. A strike-off is generally seen as a less formal method of closing a business compared to Members’ Voluntary Liquidation. 

Strike-offs are best suited for a ‘dormant’ business that hasn’t been regularly trading for a prolonged period, or has minimal assets, and involves removing the company from the Companies Register. Unlike Members’ Voluntary Liquidations, a strike-off doesn’t require a liquidator, and the process is generally quicker and less costly. 

However, the business in question must not have traded or had significant levels of activity in the three months prior to strike-off. Additionally, any remaining assets belonging to the business may be taxed as income, which would be significantly less favourable than the taxation under a MVL. This means that, unless you’re a small or inactive firm, a MVL may be the preferred option for you.

Members’ Voluntary Liquidation: Pros and Cons

MVL Pros:

  • Tax Efficiency: Any shareholder distributions are treated as capital, making it eligible to benefit from Capital Gains Tax relief. 
  • Professional Insight: A licensed insolvency practitioner (IP) oversees the process, ensuring everything follows the necessary legal process. 
  • Creditor Ease-Of-Mind: In a MVL, all debts are settled in full, protecting the company against potential consequences. 
  • Final: MVLs offer a formal and legal closure to the company’s affairs, providing finality. 

Cons:

  • Cost: MVLs can be costly as a result of fees for insolvency professionals. 
  • Time-Consuming: The MVL process may take months if the case has complex aspects (large number of assets or liabilities).
  • Administration: In a MVL, a director must declare and prove solvency, requiring detailed financial statements.

Download our FREE Guide to Liquidation

While a partnership voluntary arrangement does offer a lifeline for struggling partnerships, it’s by no means guaranteed to succeed in every case. If the partnership is unable to meet the terms of repayment, or it becomes clear that recovery is no longer viable, the next steps may be to consider closure, including liquidation options. 

Liquidation involves winding down the business and distributing assets to satisfy creditors. It’s a complex process, with various legal and financial implications — understanding this is key. For a comprehensive guide on what liquidation entails, download our dedicated Liquidation guide to learn more.

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Members’ Voluntary Liquidation Steps

Members’ voluntary liquidations involve several notable steps, all of which are necessary to ensure that the business in question is shut down in accordance with legal requirements, and shareholders are able to receive the appropriate returns with accuracy and efficiency. 

The process can typically take from six months to a year. The main Members’ Voluntary Liquidation steps include the following:

Initial Consultation

The process for Members Voluntary Liquidations will generally start with an insolvency practitioner consultation. The purpose of this meeting will be to assess the relevant firm’s current financial position (liabilities, assets, cash flow, etc.), levels of solvency, and its overall suitability for the MVL process. 

As part of an initial insolvency consultation, the expert on hand should be able to clearly provide you with the necessary information you need to make as informed a decision as possible. They will also be on hand to offer guidance should a MVL ultimately not be the best solution — providing information regarding the alternatives and how they might better suit your situation.

Appointing a Licensed Insolvency Practitioner

A licensed insolvency practitioner will be needed to administer a MVL. This is non-negotiable as it’s a part of the officially recognised process. The importance of the role necessitates careful consideration and research. You’ll want to be absolutely positive that you’re dealing with an experienced professional with a proven track record. 

Once the necessary research is completed, you should appoint an IP who will oversee and administer the Members Voluntary Liquidation, and, ultimately, the closure of the firm. 

Directors Declare Solvency

Before a Members Voluntary Liquidation can begin, all directors must sign an official Declaration of Solvency. This states that the company can repay any and all existing debts within the next 12 months. It should include contingent liabilities, which are payments that may not need to be paid, but remain possible. Examples of this include customer complaints and employee tribunals. 

The reason the Declaration of Solvency is so essential is that it’s vital that the company can repay creditors, and to also ensure that these creditors are aware of the planned closure. This is because any unforeseen claims as far as the business are concerned, could scupper any MVL plans and tip the business into insolvency, requiring alternative closure methods.

Resolution to Wind Up

Once solvency has been officially declared, the next step in a Members Voluntary Liquidation is to cast a vote, or resolution to wind up, among company shareholders. 

If, and only if, 75% of shareholders vote in favour of winding up the company via Members Voluntary Liquidation, can the process continue to the next stage.

Gazette Advertisement

An advert stating the planned closure of the business must be posted in The Gazette within 14 days of the resolution being made. The purpose of the advert is to alert any further potential creditors of the intended closure, allowing them to submit any potential repayment claims that may be made.

Asset Sale

As part of the Members Voluntary Liquidation process, all business assets are summarily sold by the appointed liquidator. Company creditors maintain the right to full repayment. This means that the sale of assets will initially go directly to paying creditors, and only once this goal is achieved can any remaining funds be distributed internally. 

As highlighted above, a MVL can afford shareholders with some Business Asset Disposal Relief, which can make this form of liquidation an attractive prospect from a tax perspective.

Company Removed From the Register

Once the liquidator has realised every single company asset, leaving the business a shell, they will file final legal documents with Companies House. Once this has been filed, another notice is placed in The Gazette to indicate company closure. The business is then removed from the Register of Companies and will, from here on out, cease to exist. 

Inquesta: Experienced Support for Members’ Voluntary Liquidations

At Inquesta, we are totally committed to providing a seamless and efficient Members’ Voluntary Liquidation process, tailored to the unique circumstances and needs of our clients. 

Our team of licensed insolvency practitioners boast extensive experience handling MVLs across various industries, and for companies of a variety of shapes and sizes. 

If you’re considering closing your solvent company via a Members’ Voluntary Liquidation, get in touch today for your free consultation. Our expert team is on hand to help you through the liquidation process and ensure a smooth and efficient closure.

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