A Members Voluntary Liquidation (MVL) is 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:
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.
What happens during Members Voluntary Liquidation?
The first step is for a Declaration of Solvency to be drawn up no later than five weeks prior to the company being placed into members voluntary liquidation.
The Declaration of Solvency must be sworn to by a majority of the directors with a solicitor present.
Evidence of the solvency up until the date of the liquidation must be provided to HMRC.
This means the company must send copies of accounts and returns, final payment information, final VAT and PAYE copies as well.
Meetings of the directors and of the shareholders of the company will then be called to pass various resolutions.
These meeting will confirm the date of the winding up of the company and the Declaration of Solvency will be noted as signed. They will also confirm the name of the liquidator to be appointed.
The Declaration of Solvency will then be delivered to Companies House.
Within 14 days of the resolutions, they must be advertised in the London Gazette. We will do this for you.
This is so any remaining creditor claims can be dealt with – even though it is unlikely any will remain.
An authorised insolvency practitioner working as the liquidator will help take charge to wind up the business.
Any money held at the company’s bank will be retrieved, any assets realised and then, assuming all creditors have been paid, a distribution of shareholders funds will be made as swiftly as possible.
A Declaration of Solvency states that directors believe their business can pay back all its debts and interest within a year or less.
It must be sworn under an oath and in the presence of a solicitor.
It should list current company property, assets and liabilities and must be signed five weeks or less prior to the date of liquidation.
The Declaration should be filed at Companies House at least 15 days before the date of liquidation.
If company debts are still outstanding by the end of the one-year period, directors must give evidence proving they had valid reasons for believing their company could pay its debts back.
If company directors cannot do this, they may face a fine, imprisonment or both.
Once formally appointed Hudson Weir can assist the directors to place the company into liquidation within seven days (if all directors are in agreement) and will then distribute cash to shareholders within seven days of the receipt of cash from the bank.
Liquidation will usually be completed within 12 months. All responsibility is passed from the directors to the liquidators during this time.
Company property and assets will usually be distributed within six months.
Liquidators also have to reclaim VAT and obtain tax clearance from HMRC which can prolong things slightly, but aside from that the process generally runs smoothly.
Hudson Weir are an established firm of Insolvency Practitioners who specialise in business recovery and corporate financial solutions. Hudson Weir provides industry leading, nationwide services for its clients with the intention of easing financial pressures and providing recovery strategies for struggling businesses.More about us