A Members’ Voluntary Liquidation, or MVL, is a legal process where a solvent company decides to shut down, liquidate its assets and distribute the proceeds to shareholders. It is a controlled way of ending a business in an orderly manner, and is generally tax efficient.
How does an MVL work?
An MVL is usually used once a solvent company is no longer required, for example where its business has been sold and the company now holds the proceeds of that sale.
The directors hold a board meeting to consider the company’s financial position and agree that it should be placed into an MVL. The directors then make a formal Declaration of Solvency, confirming that the company can pay all its debts, together with interest, within a period not exceeding 12 months.
The shareholders, also called members, then vote to wind up the company by special resolution and appoint a liquidator. The liquidator deals with the company’s assets, settles any remaining liabilities and distributes the surplus funds or assets to the shareholders.
Once everything has been dealt with, the company is dissolved and removed from the Companies House register.
How does it help?
- There is an organised, legal process for dealing with the distribution of the company’s assets.
- An MVL is usually a tax-efficient method of distributing funds to shareholders once a company has ceased trading.
Talk to your accountant, and to us
The tax treatment matters here, and it is worth taking joined-up advice. We work alongside your existing accountant rather than around them, and we are happy to have that conversation together.