The aim of a business contract is to try to provide certainty for both parties.
Whether your business has gone from thriving to barely surviving, or is seeking to improve performance, One80 can support you
A Members’ Voluntary Liquidation (MVL) is a formal process for closing a solvent company in a cost-effective and tax efficient manner. It is common for MVLs to be used as an exit tool where a profitable company has fulfilled its purpose, and where shareholders wish to distribute the profits of their investment. Alternatively, where directors or larger groups are simply looking to close down companies as they have served their purpose. Many Directors view an MVL as the best way to wind down their company’s affairs where they are solvent but no longer wish to trade.
Frequently Asked Questions
In an MVL all retained profits within the business are treated as capital rather than income. This means the funds which are distributed to shareholders are subject to Capital Gains Tax (CGT) rather than income tax. It is this tax saving which make MVLs a widely used tool for business owners looking to exit their solvent businesses.
When selling, giving away, or otherwise closing your business, you may be entitled to take advantage of Business Asset Disposal Relief (previously known as Entrepreneurs’ Relief), a tax relief scheme designed to reduce the rate of tax you are liable for. If you qualify for BADR, you will pay a flat CGT rate of 10% on qualifying gains up to a lifetime limit of £1million. The rules surrounding your ability to take advantage of this scheme will be specific to your case.
Once a director has taken the decision to place their business into solvent liquidation, they are usually keen to receive the retained profits of the business quickly. It is a straightforward process to place a company into Members’ Voluntary Liquidation. After appointment, it is normal to request any creditors to submit claims so these can be settled before a distribution to shareholders. However, if shareholders sign an indemnity to confirm they will repay funds in the event there are unexpected claims from creditors which require settling, then the majority of funds may be distributed within days of liquidation.
A Section 110, or restructuring MVL, is a process which allows a company’s assets to be transferred to another company or several companies in return for shares in that company. This is most commonly used in demergers, where one or more parts of the business of a company are transferred into different companies and may be undertaken as part of estate planning.
- Speak to one of our qualified insolvency practitioners to confirm an MVL is suitable for your business
- Take the necessary steps to cease trading at the appropriate time
- Take steps to sell all stock and assets
- Deregister for VAT
- Ensure your debtor book is settled in full
- Settle all outstanding liabilities
- Directors’ loan accounts will need to be settled
- Ask your accountant to assist with preparing final accounts.