Solvent Liquidation Advice
Are you looking for a tax-efficient and low-cost way to close your solvent company? Members’ Voluntary Liquidation (MVL) could be the right solution for you.
If this sounds familiar, then get in touch with Bridge Newland. We recognise that the idea of closing your organisation might feel overwhelming. Our friendly Insolvency Practitioners are here to provide you with essential advice and support, every step of the way.
What does it mean if you are a solvent company?
If your company is solvent, it means that you are in a position to pay off your debts within a 12-month period of entering liquidation.
It is important to note that MVL is only suitable for solvent companies. If you feel your company is insolvent, or at risk of insolvency, then get in touch with the experts at Bridge Newland to discuss your alternative options.
What is Members Voluntary Liquidation (MVL)?
Members’ Voluntary Liquidation (MVL) is a formal process used to wind up a solvent company. Unlike some forms of liquidation, MVL is a voluntary process.
The purpose of an MVL is to distribute the company’s assets among its shareholders in an orderly manner while bringing the organisation’s affairs to a close. Distributions are taxed as capital rather than income, with members able to claim Business Asset Disposal Relief (BADR), previously known as Entrepreneurs’ Relief.
What is BADR?
BADR is a type of tax relief available in the UK that can significantly reduce the amount of Capital Gains Tax (CGT) payable down to 10 per cent when selling a business (compared to the standard CGT rate, which in some cases can be more than 20 per cent).
The amount of BADR given depends on each individual’s BADR lifetime limit after taking previous disposals into account. As of 11 March 2020, the lifetime limit is £1 million.
When might MVL be the best option?
An MVL might be the best option when:
- The company’s owners want to retire (and there is nobody else in the family who wants to take over the business)
- The owners want to change career
- If the relationship between stakeholders has broken down
- If the company has more than £25,000 of funds or more available for distribution
MVL also allows business owners to close their company and then trade through a new or existing company – as long as it is not identical to the current company.
If you have little or no funds available to take out from your company, then there might be a more suitable option for your business. The experts at Bridge Newland can help you decide which route is best for you.
How long will an MVL process take?
The time an MVL takes depends on the specific circumstances of your company. However, organisations can rest assured that the professionals at Bridge Newland will work hard to ensure the process is as stress-free, straightforward and time efficient as possible.
Do you need an Insolvency Practitioner for an MVL?
Yes, it is vital that you contact a licensed Insolvency Practitioner, as an MVL cannot be done without one. Your Insolvency Practitioner, like ours here at Bridge Newland, will be key to coordinating the MVL process and ensuring it is successful and smooth.
What will an Insolvency Practitioner do?
As your Insolvency Practitioner, the services we can support you with include:
- Drafting all forms including the director’s Declaration of Solvency (a key document in the MVL process, which allows the company’s directors to legally declare that the company will be able to repay its debts within 12 months)
- Documenting director and shareholder decisions or holding meetings of these if required
- Realising the company’s assets
- Distributing funds to shareholders (members)
- Overseeing the payment of any outstanding debts
- Providing Directors and shareholders with regular updates and reports
Are you considering a MVL? Get in touch with Bridge Newland
If you are considering a MVL or would like to discuss the options for your business, get in touch with Bridge Newland. Every business is different, which means it is essential that you speak to our team of Insolvency Practitioners, so you can decide whether MVL is the right solution for you.