Members’ Voluntary Liquidation (MVL)
Company liquidation is usually a process carried out due to being financially unsuccessful or being unable to pay its creditors the money owed. If this was the case, the company would be placed into liquidation by the directors and shareholders, any remaining assets would be realised and any creditor liabilities covered out of these assets after settling the liquidation costs.
However, this does not always have to be the case, as successful companies’ lifecycle can also come to an end and the directors and shareholders wish to close the business. Member Voluntary Liquidation (MVL) is available to solvent companies: not only do they need to be able to settle any current liabilities but also be able to cover any HMRC liabilities not due yet (PAYE/NIC, Corporation Tax or VAT).
To be able to initiate the MVL, the company needs to appoint a licensed Insolvency Practitioner as a liquidator who will guide you through the process. Once all formalities have been concluded, the company is placed in the liquidators’ control, any assets are realised, creditor claims are settled and any surplus is distributed to the shareholders. It is important to note that the shareholders may enjoy some taxation benefits from any distribution, as dividend distribution is rarely classified as an Income distribution, but Capital distribution, hence it will be taxed as Capital Gains, which is at a lesser tax rate.