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Corporate Solutions - Members' Voluntary Liquidation

A Members’ Voluntary Liquidation (MVL) (or Solvent Liquidation) enables shareholders to put a solvent company into liquidation in order to unlock their capital. It can be used to secure an orderly winding up of a company or to close down a subsidiary (within a group of companies) that has outlived its usefulness.

Shareholders appoint a Liquidator, and a Statutory Declaration of Solvency is required, stating that the directors have conducted a full enquiry of company affairs and believe that it can repay its debts, with interest, within a 12-month period.

The Liquidator is appointed at an extraordinary general meeting of the company, if approved by 75% of shareholders’ votes. The Liquidator realises the company assets, settles any creditor claims and distributes the remaining assets to shareholders.

As licensed insolvency practitioners, we can accept appointments as Liquidators, using their industry knowledge to seek optimum results that will benefit all parties.

It is extremely important that the full tax implications are considered by the directors before selecting the Members’ Voluntary Liquidation option. As long as certain criteria, is met it is possible that Capital Gains Tax will be payable at 10% on the gain subject to the maximum lifetime limited, currently £10,000,000.

Example

 

Mrs M, the sole shareholder of Company A.

Company A stopped trading and in July 2013. After the deduction of all outstanding liabilities the company still had assets of £150,000.

The gain qualifies for Entrepreneurs' Relief, and she has no other gains or losses.

Capital Gains Tax is due on £139,100 (£150,000 less Annual Exempt Amount £10,900).

At the Entrepreneurs' Relief rate of 10 per cent her Capital Gains Tax due is £13,910.

If Entrepreneurs Relief was not claimed then the usual rates would apply and Mrs M would pay:

18% on first £32,010
£5,761.80
28% on remaining £107,090
£29,985.20
 
£35,747.00

Therefore Mrs M saves £21,837.00 by claiming Entrepreneurs Relief.

If you have any further questions with regards members' voluntary liquidations, please don't hesitate to contact us.

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