Everything you’ll need to do to make your MVL a success

For business owners who have successfully navigated the entrepreneurial journey with one company and are looking toward sunnier shores elsewhere – a Members’ Voluntary Liquidation (MVL) offers an effective, structured and tax-efficient route. 

It will work most efficiently when participants fully understand the key phrases of the journey. 

Stage 1: Laying the Groundwork – Pre-Contact Preparations

Before engaging an insolvency practitioner, preparation is essential. 

This stage is about tidying up the various loose ends and ensuring the company is officially ready for closure. Firstly, confirm the company has ceased trading. This is a fundamental requirement. Next, tackle any existing and outstanding tax obligations: de-register for VAT, submit the final VAT return, de-register as an employer, submit the final PAYE return, and instruct your accountants to prepare final accounts and a Corporation Tax return. They can also help you make sure you haven’t missed anything critical as any outstanding tasks will add to the time it takes to complete the MVL and possibly increase final costs too. 

Asset management is another important aspect. Ensure all non-cash assets, including director’s loans, fixed assets, and stock, are either sold, written off, or collected. Settle all outstanding debts owed to the company. Confirm with your accountant that all tax liabilities and other liabilities are paid in full. If a company pension scheme is in operation, it must be closed, and members’ benefits transferred. Ensure any ongoing litigation has concluded, and consolidate all funds into instant access bank accounts. Again, a failure to meet these criteria can delay the MVL process and incur additional fees.

Stage 2: Initial Contact and Assessment – Happens on the same day

Upon contacting an insolvency practitioner, they will conduct the essential ID checks and request information to verify the company’s readiness for closure, including details of the final cash balance for distribution. If you’re satisfied with the process, you’ll receive the terms of business and fee details for your review and final approval.

Stage 3: Finalising Company Affairs – A Flexible Window

While the tasks in Stage 1 should ideally be completed, this stage provides a window to address any remaining issues. Once all pre-contact tasks are complete, then the process moves to the next stage.

Stage 4: Withdrawal of funds and Fee Payment – Swift Transactions

This stage involves settling the agreed fees and disbursements from company funds. Subsequently, the remaining company funds are withdrawn and distributed in accordance with shareholdings, prior to closing the company bank accounts. These funds will initially be treated as a loan to shareholders, pending the issuance of distribution notices.

Stage 5: Declaration of Solvency – A Formal Affirmation

The insolvency practitioner will provide a declaration of solvency, detailing the company’s final position. This document must be sworn by shareholders before a solicitor. Remember – a false declaration of solvency is a criminal offence.

Stage 6: Shareholders’ and Directors’ Meeting – Formalising the Liquidation

A meeting of shareholders and directors is convened to formally place the company into liquidation. The timing of this meeting depends on the number of shareholders involved. With 90% shareholder engagement, the meeting can be held promptly. Otherwise, 14 to 21 days’ notice is required, depending on the company’s age. Upon conclusion of this meeting, the company formally enters liquidation.

Stage 7: Post-Liquidation and Distribution – Finalising and Distributing

Once in liquidation, any remaining assets are realised and distributed, first to any remaining creditors and then to members. For simpler cases, the cash withdrawal from Stage 4 is distributed in specie. In more complex scenarios, members may provide an indemnity to facilitate early distributions while creditor claims are finalised. Your accountant will also remind you to declare any distributions on your personal tax return for the financial year.

Now you have an understanding of the timeline involved with a typical MVL, you can see how swiftly and smoothly it can proceed to close a solvent business. 

Get in touch with us today and you could begin to enjoy the proceeds of your years of hard work within days!