Frequently Asked Questions

If a company is solvent (it can afford to pay all it’s debts), a Members Voluntary Liquidation is a tax efficient way of closing it.

Directors themselves begin the process of Liquidation of the Company by contacting an Insolvency Practitioner.

An MVL is one of the most common way for directors and shareholders to realise any assets the business has, this could be cash, buildings, cars etc.

When is the MVL procedure appropriate to use?

The Members Voluntary Liquidation procedure is appropriate when a solvent company has come to the end of its useful life and needs to be wound up. For example:

• When a company is an old established family business where the owners/parents have retired and children or family do not want to run the business.
• Shareholders want to retire and have cash and/or a property within the company which they want to transfer into their personal estate.

Now with the new provisions of entrepreneur’s relief, it is also more tax efficient to take money out of the company via an MVL rather than taking it all out as a special dividend in most cases.

It always worth checking this with your accountant first.

Please note, an MVL is NOT appropriate if the company is insolvent. If this is the case and you swear the declaration of solvency, you could be committing a criminal offence.

The appropriate procedure if the company is insolvent (can’t pay it’s debts) would be Administrative Dissolution if the company has no, or very few, assets, or a Creditors Voluntary Liquidation if there are assets to liquidate.

How does the Members Voluntary Liquidation process work?

The process can vary case to case, depending on what assets your company has.

For example is it just money in the bank or owning some buildings? Below is an idea of the process you would go through using an MVL.

• As the director of the Limited company you will first need to appoint a licensed insolvency practitioner (liquidator) to carry out the process.
• The first thing a liquidator will do is file appointment documents at Companies House.
• The liquidator will then publish in The London Gazette (or the Edinburgh Gazette) a statutory notice of his appointment.
• A notice of solvency will be submitted to HMRC.
• The liquidator will then complete post-liquidation VAT return and deregister the company at Companies House.
• The liquidator will write to the bank to close the account and receive company funds.
• After 1 month the liquidator will distribute any funds to the shareholders.
• A final report will be prepared to the shareholders and a meeting is held.
• A final corporation tax return will be submitted for the post-liquidation period.

Will an MVL have a negative effect on you?

Although the voluntary winding up petition has to be advertised in the Gazette, making it a matter of public record, an MVL is not considered an insolvency procedure and therefore it should not negatively affect your business reputation or your credit score in the same way a creditors’ voluntary liquidation (CVL) would.

If you would like some more information on whether an MVL is suitable for you and your company please call us on 0800 975 0380