An MVL is a solvent liquidation utilised to formally close down a Company. Where appropriate, Company assets are realised in order that debts are discharge in full, together with interest, with the balance being distributed to shareholders in a timely and tax efficient manner.
Under an MVL the distributions made by the Liquidator to the shareholders are considered capital distributions as opposed to income distributions. Capital distributions are subject to Capital Gains Tax not Income Tax, and as a result the tax payable is often reduced after applying the various reliefs that are available.
The process of placing the Company into Liquidation and appointing a Liquidator initially requires the Director(s) to evidence the Company’s solvency by swearing a Declaration of Solvency. Following this, a Meeting of Members is to be convened to allow for formal resolutions to be adopted. In order to place a Company into liquidation there is a requirement to obtain in excess of 75% of Company members voting at the Meeting.
Key Facts:
- The Director must swear an affidavit in support of a Declaration of Solvency (document showing the assets and liabilities of the Company proving it to be solvent).
- The Declaration states that the Director(s) have conducted a full enquiry into the company’s affairs and have formed the opinion that the Company is in a position to pay all debts, together with interest, within 12 months of the date of liquidation.
- Whilst recognised by the Courts, this is not a Court driven process and is designed to be relatively straightforward.
- Once the Company is in Liquidation, responsibility for the Company’s assets and liabilities transfers to the appointed Liquidator.
- There is no requirement to investigate the conduct of the Director(s).
How we can help:
- We will arrange a free initial consultation with the Director(s) and or Member(s) to examine the position and determine whether an MVL is suitable.
- Explain the process adopted in detail and answer any questions or concerns.
- Convene the requisite Meetings on the Director’s behalf.
- Assist in preparation of the Declaration of Solvency and other statutory forms.
- Liaise with tax and legal advisors if appropriate.