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What is a Members' Voluntary Liquidation (MVL)?
A Members' Voluntary Liquidation is a process carried out by shareholders of a solvent company. In this process, the shareholders will appoint a liquidator under special resolution to realise the assets of the business in order to distribute the proceeds to the company's members.
To enter into an MVL, the directors of a company must make a sworn Declaration of Solvency. This states that they have thoroughly reviewed the company's balance sheet and finances and have concluded that the business is solvent and able to reasonably repay all existing and prospective debts within a period of no more than 12 months.
Although the special resolution must be advertised, an MVL is not considered an insolvency procedure and therefore should not negatively affect the business’ reputation in the same way as a creditors' voluntary liquidation (CVL) could.
As the company has been wound up, and the value extracted, anyone that benefits from an MVL may no longer be liable to Income Tax on their gains, but could be subject to Capital Gains Tax instead. And, as many shareholders are liable for higher rate Income Tax on dividends, such a process can be a highly effective and much more cost effective method of realising their full worth.
The decision to wind up a company is never easy for the directors and / or its shareholders. This decision is complicated by the potential tax implications for the company’s shareholders. In order to achieve a winding-up in the most tax efficient manner from both a personal and corporate tax perspective, you should seek expert advice on whether a liquidation would be beneficial to you.
Contact My Insolvency today on 0800 009 6106 for a free, confidential, no obligation conversation with one of our restructuring and turnaround experts.
MVLs are used for a variety of reasons
• Tax planning reasons;
• To resolve disputes amongst a company's shareholders;
• To reorganise a company's activities into a more efficient structure (often using a process called a Section 110 IA 86 arrangement); or
• In order to release capital to the shareholders of a company.
An explanation as to the types of liquidation (both solvent and insolvent).
A free PDF guide for directors and owners explaining Members Voluntary Liquidation (MVL) .Download