A members’ voluntary liquidation (MVL) is a procedure whereby directors wish to wind up the affairs of a company and the company is in a position to pay creditors in full. It is only applicable in circumstances where the company is solvent and where the taxation implications determine a MVL as being appropriate.
Objectives of a MVL
A MVL is used where the company has fulfilled its useful purpose and wants to return shareholders’ capital or where it is surplus to requirements where it forms part of a group. A MVL allows for all assets to be realised, creditors paid and the remaining surplus to be distributed to shareholders.
What Happens in a MVL?
A majority of directors of the company must produce and sign a statutory declaration that they have made a full inquiry into the company’s affairs and formed the opinion that the company will be able to pay its debts in full within 12 months. This declaration is known as a declaration of solvency and it is a criminal offence to knowingly make a false or misleading declaration.
A MVL is normally instigated by the company directors who, having taken the decision, will call a meeting of the shareholders. The shareholders are invited to vote on the special resolution to voluntarily wind up the company. Once the resolution has been passed, the shareholders then appoint an insolvency practitioner to be the liquidator of the company.
The liquidator is responsible for realising the company’s assets, agreeing creditors’ claims, making distributions to creditors in respect of their claims plus interest before returning any surplus asset value to the shareholders.
In the event that the liquidator forms the opinion that the company will not be able to pay all its debts, he must convene a decision procedure of the creditors and convert the liquidation into a Creditors’ Voluntary Liquidation.
MVL’s can also be used as part of a reconstruction under a process called a Section 110 reconstruction. This can involve splitting assets or different trades within one limited entity into separate limited entities. This process will involve both the IP, your solicitor and tax advisor to ensure clearance from HMRC has been agreed in advance.
What Services can PBC Business Recovery and Insolvency Undertake?
PBC Business Recovery and Insolvency can undertake the following services:
- We can advise directors, alongside the company’s accountant and/or solicitor whether a MVL is appropriate.
- We will assist the directors in preparing the declaration of solvency.
- We will act as liquidator.