Members’ Voluntary Liquidation (MVL)
Why use an MVL?
An MVL is cost-effective way to shut down a solvent company. It is a formal process in which a profitable solvent company can wind down its operations which has reached the end of its life cycle, if the directors themselves are approaching retirement from the business, or for any other reason. MVLs can be used to save tax as an efficient way to distribute capital to shareholders. We have also used them as a way to resolve shareholder disputes.
Benefits of an MVL
An MVL can be a tax-efficient way of winding up a company. All retained profits are treated as capital rather than income, where the funds distributed are subjected to capital gains tax gains rather than income tax. This would give tax savings and possibly attract entrepreneur’s relief, now known as Business Asset Disposal Relief, resulting in a tax rate of 10%.
How does an MVL Work?
An MVL process is initiated by the shareholders who decide that they want to voluntarily enter into liquidation. All assets are realised or distributed in specie and used to settle any outstanding liabilities. The surplus is then distributed to the shareholders in a tax-efficient manner.
What is the Process?
- Directors or members decide to wind up the company and wind down the business
- The directors call a meeting of members or seek a members’ written resolutions
- A liquidator is appointed and is mandated to realise all the company assets and settle all creditor claims
- The surplus assets are then distrusted to the shareholders
- A final account is circulated to members and then filed at Companies House where the company is then dissolved.
If you are ready to close your business through an MVL and would like to speak to a member of our team, please contact Paul Davis, our Head of Corporate Recovery and Insolvency, for an initial free consultation.