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Solvent liquidations

Solvent liquidationsRecent research by insolvency body R3 showed that a record number of solvent companies were wound-up in March 2016, and this trend is certainly reflected in the work we undertake at PBC. In fact, in the last 18 months, the Members’ Voluntary Liquidations (MVL) we have been involved with have paid £20,591,420 to shareholders alone.

An MVL is a voluntary procedure whereby the directors wish to wind up the affairs of a company, and the company is in a position to pay its creditors in full. The money paid out to shareholders as treated as a capital gain, which is taxed at a much lower rate than income in most cases.

It is true that the big spike is due to the tax changes that came into effect on 6th April. This prohibits directors winding up a solvent company from claiming Entrepreneurs’ Relief on their Capital Gains Tax if they carry on in the same or similar business in the following two years. However, the number of solvent liquidations has been going up for some time, and there are also other influences at play.

Gavin Bates, Insolvency Practitioner at PBC, explains: “One of the main factors is that we now have a generation, born in the late 1950s and early ‘60s, who set up a business and are now looking to retire. Whilst many of them assumed they were building a business to pass on to younger family members, in truth this hasn’t happened. In some cases, this is because the business is of the older ‘manufacturing type’ which a lot of children are simply not interested in. We have also seen other examples where business owners have invested heavily in their children’s education and in providing financial support and the children have then chosen to go into the professions rather than the family business.”

Gavin also commented: “This can be a very difficult for directors as they want to stop trading and retire but in many cases they are unsure where to start. I have worked with a number of different industries in helping directors develop a shutdown plan. This can include many issues but the most common concerns are dealing with employees and customers.”


For more information on MVLs please visit