Members’ Voluntary Liquidation (MVL)

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• Circumstances Leading to MVL
  • Purpose fulfilled: The company has achieved its objectives, and there is no longer a need for its continued existence.
  • Retirement or exit strategy: Shareholders may wish to retire or pursue other opportunities, leading to the decision to wind up the company.
  • Surplus assets: The company is solvent, with sufficient assets to settle all liabilities and distribute surplus funds among shareholders.
• Steps Involved in MVL:
  1. Directors’ Declaration of Solvency: The directors must make a formal declaration of solvency, confirming that the company can pay all its debts, including interest, within a specified period not exceeding 12 months.
  2. Shareholder Resolution: A special resolution is passed at a general meeting of shareholders, authorising the winding up of the company and appointing a liquidator.
  3. Appointment of Liquidator: An insolvency practitioner is appointed as the liquidator to oversee the MVL process, realise assets, and distribute funds to shareholders.
  4. Realisation of Assets: The liquidator identifies and sells the company’s assets, including any surplus cash, investments, or property, to maximise returns for shareholders.
  5. Distribution to Shareholders: Once all liabilities have been settled, the liquidator distributes the remaining funds to shareholders in proportion to their shareholdings.
  6. Final Reporting and Dissolution: The liquidator prepares a final account of the winding-up process, which is circulated to shareholders and filed with Companies House. The company is then dissolved, and its legal existence ceases.
• Benefits of MVL:
  • Tax efficiency: Surplus funds distributed to shareholders through MVL are typically treated as capital rather than income, attracting lower tax rates such as capital gains tax.
  • Controlled wind-up: MVL allows shareholders to wind up the company voluntarily in an orderly manner, maintaining control over the process and avoiding the risk of compulsory liquidation.
  • Simplified exit strategy: MVL provides a straightforward means for shareholders to exit the company and realise the value of their investment, whether for retirement planning or pursuing new ventures.
  • Enhanced creditor satisfaction: By settling all debts in full before distributing surplus funds to shareholders, MVL demonstrates a commitment to fulfilling obligations and enhances creditor satisfaction.