What is Members Voluntary Liquidation?
A Members’ Voluntary Liquidation (MVL) is an option for solvent companies wishing to wind down their activities. Unlike other types of liquidation, an MVL is not an option if your company is insolvent.
This means that your company must hold enough assets to be able to settle all liabilities and interest in full within 12 months.
This solvent liquidation allows the company’s assets to be distributed in a tax-efficient manner by the liquidator and can help protect against future claims.
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
- 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.
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.