Even if they don’t make it an official new year’s resolution – one of the aims of most business owners or directors will be to be in a better financial position at the end of it.
Fewer than you’d imagine take concrete steps to help achieve this aim apart from working to make their current enterprise more profitable and successful – but this is what they should be doing anyway.
There is a way for directors to close their business – if it’s solvent – and still make the most of their position to benefit and begin 2024 with an enhanced bank account and a clean professional slate to pursue their next career journey anew.
It’s called a members’ voluntary liquidation (MVL) and can be the quickest and easiest way to deliver a professional fresh start.
What is an MVL?
The technical explanation of an MVL is it’s a process initiated by shareholders of a solvent company who are looking to wind up and distribute company assets, in order to release the cash value in the most tax-efficient method possible.
Please note that It is a formal insolvency process and therefore has to be carried out by a qualified and licensed insolvency practitioner (IP).
The IP will first settle any outstanding debts and legal disputes and will pay creditors through profits and the sale of assets. The remaining funds will then be distributed to the members.
Why choose an MVL?
Apart from the appeal of a fresh start there are several other advantages to closing down your business via an MVL.
The main one being that it provides a structured and legally compliant process for the orderly closure of the business. This is beneficial for the company and directors’ reputations as well as being able to manage the impact on employees, suppliers and customers.
Additionally, depending on the circumstances, shareholders and directors could take advantage of potential tax benefits as realised assets or funds could be treated as capital gains and taxed at a lower rate than income tax.
The MVL process also provides protection.
Unlike in a compulsory liquidation or a creditors voluntary liquidation (CVL) process, there is no risk of any personal liability or investigation for any director as they have made the decision to close the business themselves and therefore there is no mandated report to the Insolvency Service on their actions leading up to the liquidation.
A Members’ Voluntary Liquidation provides an efficient and controlled way for directors and shareholders to conclude the affairs of their business and distribute its assets accordingly – no mess, no fuss, no stress.
MVL eligibility
A lot of offers and schemes that sound too good to be true often turn out to be but in the case of an MVL – it is as good as it sounds.
The downside is that many directors of businesses that aren’t eligible will try to close using the method, which is where they first encounter difficulties.
There are five main criteria to consider when deciding if an MVL could be an appropriate way to close a business.
These are:-
- Has the company stopped trading already – or is about to?
- Did it carry out trading activities?
- Have directors owned shares in the business for at least 12 months?
- Is it debt free or can it repay all outstanding debts within 12 months?
- Does it have at least £25,000 worth of assets to distribute to shareholders after closure?
If the answer to each of these simple questions is yes then your business will be eligible for an MVL.
So whether you have dreamed of a fresh start to a new year or are intrigued enough by the concept to consider it as your next professional move – you should get in touch with us today to arrange the next step.
They will be able to apprise you of all your options including some you may not have considered or thought you might have been eligible to apply including MVLs.
All you have to do is get the ball rolling by getting in touch and we’ll do the rest when we confirm your first conversation with us.
2024 could be the year that everything changes for you personally and professionally. Get it off to the most sensible start right now.