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What Is A Members' Voluntary Liquidation?

Posted 3 years ago

What Is A Members' Voluntary Liquidation?
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In short, a Members' Voluntary Liquidation (MVL) is the process that enables shareholders’ to appoint what is known as a Liquidator to formally close down a solvent company. Directors of companies wishing to utilise the MVL must make a sworn declaration that the company:

  • is solvent
  • can pay all its taxes
  • can pay all its creditors
  • can meet all its contractual obligations

Why would a company be placed into MVL?

There are a number of reasons why a company might be placed into this form of liquidation. Below are just a couple of reasons:

A company is looking to end trading

For shareholders this may be an appropriate exit strategy since they may be able to obtain a tax-efficient release of capital under the entrepreneur’s relief scheme. The distribution as capital, through an MVL may be more beneficial for tax purposes compared to a distribution under income tax. We will delve into the tax benefits of an MVL later. 

To reorganise a company

A Members' Voluntary Liquidation may be used as a way in which to re-organise a group of companies. For example, if a subsidiary company is no longer required or may have become irrelevant. An MVL can enable this company to be shut down. 

What is the process?

To begin with, a licensed insolvency practitioner will be appointed as a liquidator for an MVL. Generally, a company must:

  • have completed its business and ceased to trade
  • believe it will have surplus funds left once creditors have been paid
  • have deregistered or be in the process of deregistering for VAT/PAYE/NIC and Corporation TAX
  • be able to pay any unpaid creditors within 12 months of the start of a liquidation.

 Once the above steps have been satisfied, the MVL process is as follows: 

  1. The company directors make a declaration that the company is solvent. For this to be achieved, a closing financial statement must be written and sworn before a solicitor. 
  2. Once this has been completed, and within five weeks of the declaration, directors must arrange a meeting of the company’s shareholders. At this meeting, shareholders will be asked to pass a resolution to agree to the company being placed into liquidation and appoint a liquidator.
  3. The liquidator will take control of the company and the directors’ executive powers end. At this stage, the liquidator will realise the company’s assets, settle creditor claims and distribute any surplus funds to the shareholders.
  4. A company’s assets can then be distributed to shareholders, thereby removing the need for them to be sold.

What tax benefits are available for shareholders?

There are a number of tax benefits available under MVL. Primarily, the fact that shareholder distributions are treated as capital distributions means that a low rate of tax is incurred as opposed to conventional dividends. 

Entrepreneurs Relief

As well as the above, MVL distributions may qualify for Entrepreneurs’ Relief, a government scheme which allows a reduced Capital Gains Tax of 10% on qualifying assets. 

For more details on Entrepreneurs Relief - visit our dedicated guide

Author: Sacha Bright & Oliver Murphy


To the best of our knowledge, the information we have provided is correct at the time of publishing. Sacha Bright is not a solicitor or accountant and we recommend that you seek professional advice on any topic discussed. Nextfin is not liable for any damages arising from the use of or inability to use this site or any material contained in it, or from any action taken as a result of using the site. 

Tagged: entrepreneur tax relief sme business alternative finance

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