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Members Voluntary Liquidation Explained


Member’s Voluntary Liquidation (MVL) is where the shareholders of a solvent company adopt a voluntary winding up resolution and appoint a liquidator to realise the assets of the business to distribute the proceeds to company members. A company is considered legally solvent when it can meet its financial obligations and the value of its assets (i.e. equipment, contracts, inventory, invoices, bank account funds, property etc.) exceeds the total sum of all its debts and liabilities.

 

To enter into an MVL the directors of a company must make a sworn declaration of Solvency, which states that they have reviewed the company’s balance sheet and finances to conclude that it is solvent and able to reasonably repay all existing and prospective debts within a period of no more than 12 months.

 

The procedure will mean the end of the company, however the shareholders will be able to extract the value of the business in the form of cash.

 

An MVL is a very tax efficient procedure where shareholders of the company receive funds and only pay 10% tax. This is called a capital distribution and is allowed by HM Revenue & Customs.

 

A solvent liquidator also has the power to distribute assets in specie to shareholders instead of turning them into cash.

 

If you do have any questions about the above or would like advice on starting the MVL process, please contact the Timothy James Partnership on 01527 839920.


Added: 27 Apr 2017 14:16


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The Timothy James Partnership

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Insolvency Practitioners Association
About Us


We are an independent firm of specialist Licensed Insolvency Practitioners located in Bromsgrove, Worcestershire.

At The Timothy James Partnership, we work very closely with local businesses and professionals, providing guidance on formal insolvency procedures and advice on restructuring businesses.

We recognise that at times, companies find themselves in difficult financial circumstances and our aim is to provide practical solutions in these situations.