Members Voluntary Liquidation (MVL)

A Members Voluntary Liquidation (MVL) is a solvent liquidation process that enables shareholders who may be looking to retire or exit the business, to withdraw their capital in the most tax efficient manner. This process can only be requested by the company’s Directors, and can only be initiated when 75% of shareholders agree to the winding-up process.

If you’re exploring the option of voluntary liquidation, the team at Restart BTi are here to provide expert MVL help. To receive your free, confidential consultation, where we can explore your options in more depth, simply contact one of our helpful team members today.

What is a Members Voluntary Liquidation?

An MVL is a cost and tax-effective solution to close your solvent business and is suitable for those businesses:

That can pay their liabilities in full within 12 months
Have distributable reserves of £25,000 or more

The first step in obtaining an MVL is to make a statutory declaration of solvency. This confirms the company can pay off its liabilities within a period not exceeding 12 months. Once the declaration has been sworn, a shareholder meeting will be held at which point resolutions to wind up the company and appoint a Liquidator will be passed.

Once all the formalities have been approved, the Liquidator will take control and lead the formal closing of the business. This will include the winding up resolution being published in The Gazette, updating Companies House, realising the company’s assets, settling any outstanding debts with creditors and being in control of fairly distributing any remaining funds to shareholders.

Is Members Voluntary Liquidation tax efficient?

An MVL is a preferred method of liquidation for many directors as it means that money can be distributed among shareholders as capital gains rather than income. This means that those involved will be charged at a much lower rate than income tax.

If part of your company assets include land, property or other forms of possessions that may not be easily converted into money, then it’s important to consider getting all your affairs in order before you apply for a MVL. This includes obtaining an independent valuation.

Not only that, but a Members Voluntary Liquidation may also offer Business Asset Disposal Relief, formerly known as Entrepreneurs Relief. This is a scheme enabled by the UK Government, which allows Director(s) to obtain a tax rate of only 10%. This is a much greater relief than if these funds were to be distributed as wages or dividends.

What is the difference between an MVL and a Creditors Voluntary Liquidation (CVL)?

There is often confusion between an MVL and a Creditors Voluntary Liquidation. A Members Voluntary Liquidation applies only to solvent companies, whereas a Creditors Voluntary Liquidation is a formal process used to close insolvent companies.

What are the stages of applying for an MVL?

Directors meeting

The first part of the Members Voluntary Liquidation process is the Directors meeting. Here, a winding up resolution for the business is discussed, written and agreed upon by all shareholders. Your Insolvency Practitioner will work with you to act as a liquidator and ensure that all processes are carried out correctly and fairly.

Declaration of Solvency

Once a winding up resolution has been written, a declaration of solvency can be made. This is a formal, written statement of the company’s assets, liabilities and creditors with a declaration that all debts can be paid before the official closure of the business. It is signed by all Directors, unless there are more than two Directors, in which case a majority number will need to sign.

Shareholders meeting

At this stage, shareholders will be asked to pass resolutions winding up the company and appointing a Liquidator. To complete this process, a majority vote of 75% will be required

Liquidation

Once all shareholders have agreed to the proposed winding up order, then the formal process of liquidation can begin. Here, your Insolvency Practitioner will be in control of liquidating your business. This will include dealing with creditor enquiries, paying any outstanding fees and paying out dividends.

Deed of Indemnity

All distributions to shareholders will be made subject to an indemnity, which allows the liquidator to recover those funds in the event that a creditor has a valid claim against the company.

Final Report

Once all assets have been realised and distributions made, a final report will be issued with the company being dissolved a few months later.

Why would a company need a Members Voluntary Liquidation?

There are many different reasons why a solvent company may opt for a Members Voluntary Liquidation over other methods of closing a business. Typical scenarios could include:

A company Director(s) may be looking to retire, change their employment to another full-time position or move overseas. To do so, they would formally need to close their company, unless a suitable replacement was required and found (although, this would be at the discretion of the current Director(s)).
A business is simply looking to cease trading, and an MVL may be the most appropriate option for tax relief benefits.
A company that is looking to close has many shareholders and wants to fairly split all assets or settle any legal disputes.

Get MVL Help with Restart BTI

Only a licensed Insolvency Practitioner can act as liquidator in an MVL and easily guide you through the process. Here at Restart BTi, our experienced team works with you to make sure that you are given the right advice and that liquidation is the correct process for the Company. We endeavour to ensure that the procedure is concluded as quickly and as pain free as possible.

We offer a competitive fixed fee pricing structure dependent upon the circumstances of the case. Our service includes a free initial consultation, expert guidance and support, confidentiality, and a fully licensed practitioner that will support and stay with you throughout the full process. To get in contact and receive your free consultation, simply fill out the short form below.

Are there any tax benefits with an MVL?

Through an MVL, you may be able to liquidate your business with a lower tax rate than through dividends. All assets, including finances, are treated as capital distributions between shareholders. For more information regarding your unique circumstances, talk to one of our Insolvency Practitioners for guidance.

How long does a Members Voluntary Liquidation take to complete?

The specific times for completing an MVL vary depending on a variety of circumstances. Typically, the distribution of funds between shareholders and creditors can take anywhere from 1 week to 2 months to release funds.

How much does it cost to get an MVL?

If you’re looking to apply for a Members Voluntary Liquidation, then there are two costs involved. The first is your fee to your Insolvency Practitioner, the second is the fees involved with applying to post your liquidation in the Gazette. Each notice usually costs around £60 (plus VAT), and a bond typically costs £200.

Can I get an MVL myself?

No. To apply for a Members Voluntary Liquidation, you will need to assign the help of a licensed Insolvency Practitioner. Contact us today for expert MVL help.

What is the difference between CVL and MVL?

A creditors’ voluntary liquidation (CVL) is used for insolvent liquidations, whereas a members’ voluntary liquidation (MVL) is used when a company is solvent.

Can I do a members’ voluntary liquidation myself?

Only shareholders (members) can place a company into liquidation. From here they must appoint an authorised insolvency practitioner such as Restart BTI. Get in touch with us today to learn more about the MVL process and how we can help your business.

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