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Members Voluntary Arrangement

An MVL will result in your company closing, its assets being sold by a liquidator and its trading coming to an end.

Is your company nearing the end of its trading life? If your company is financially solvent, has few or no liabilities and no longer serves any commercial purpose, a Members Voluntary Liquidation is an easy, effective way to wind it up.

A Members Voluntary Liquidation, commonly known as an MVL, is a winding up process that allows your company’s shareholders to voluntary liquidate its assets and extract their value in the form of cash.

This differs from other forms of liquidation, which involve creditors winding up insolvent companies. In order to use an MVL, your company needs to be solvent, easily able to repay its creditors and near the end of its commercial life.

Introduction to FRP

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    What is a Members Voluntary Liquidation?

    Unlike a Creditors Voluntary Liquidation or compulsory liquidation, an MVL is a form of liquidation that’s initiated by your company’s shareholders and directors, rather than the company’s creditors.

    An MVL is a winding up procedure that allows your company’s shareholders to convert its assets, such as equipment, property or bank account cash – into cash, without being subject to Income Tax.

    Since the cash raised from the liquidation of the company’s assets is a capital gain, it’s subject to Capital Gains Tax. This makes an MVL a good choice for shareholders that would like to end a company, while minimising their Income Tax costs.

    Like all other forms of liquidation, a Members Voluntary Liquidation is a matter of public knowledge. Despite this, closing a company using an MVL is not considered an issue and will not affect your ability to direct another company in the future.

     

    Understanding Members Voluntary Liquidation

    An MVL will result in your company closing, its assets being sold by a liquidator and its trading coming to an end. It’s a serious solution that should only be used if you’re interested in ending your company and extracting cash via the sale of its assets.

    Unlike a Creditors Voluntary Liquidation, which can be initiated by a company that’s insolvent and unable to pay its creditors, a Member’s Voluntary Liquidation can only be started by a company that is solvent and able to pay its creditors in 12 months.

    The MVL process requires your company’s shareholders to prepare a Declaration of Solvency. This is a document that verifies that the company is solvent and eligible to start the liquidation process.

    The most common reason for companies to use an MVL is to extract value without a large Income Tax bill for shareholders. Since MVL cash is classified as a capital gain, it’s subject to Capital Gains Tax based on the shareholder’s Income Tax rate.

     

    Contact us to learn more about Members Voluntary Liquidation

    If your company is financially solvent and able to pay all of its creditors in under 12 months, the MVL process is an excellent, tax-efficient way to extract cash from the sale of its assets and close the company.

    Our business recovery experts have provided advice and assistance to hundreds of UK companies. Contact us now to learn more about the MVL process and discover if it’s a suitable choice for your company.