The quick answer
Since the 1st March 2012, a limited company with assets above £25,000 has had to use a Member’s Voluntary Liquidation (“MVL”) if it wants to treat the money returned to shareholders as capital rather than income.
The main advantage to an MVL has been to save tax. Money paid to shareholders of a trading limited company will usually only be charged at 10% Capital Gains Tax on the first £1 million to each shareholder. If the same money is paid out as a dividend the tax rate could be as high as 45%, however this would depend on your individual tax circumstances.
In more detail
A Members Voluntary Liquidation needs a Licensed Insolvency Practitioner like us to be the liquidator. When talking about an MVL, the term “members” means “shareholders” so it is a liquidation driven by the owners of the shares.
We prepare all of the statutory paperwork and meet you (or it can be by Zoom or Skype online) to discuss the process. A fixed fee is usually agreed in advance for the liquidation.
Another advantage to a formal winding up in using an MVL is that a notice is placed by the liquidator in the London Gazette which effectively gives any creditors or potential creditors a last chance to make a claim.
Once the date for the final creditor claims has passed then it will be too late for any creditors to make a claim (but they must be notified of the liquidation) . That is very useful for a limited company that has been going a long time and may have some minor problems in the past that have never crystallised.
The important issues for directors of a limited company to consider are:
- Getting an accurate up to date balance sheet showing all of the assets and liabilities. This is needed for the statement of affairs.
- Having available all of the names and addresses of the shareholders (the members).
- To reduce the liquidator’s costs, it is advisable to have the company in as simple a form as possible. This means having collected in all of the assets and sold them, laid off staff and paid out creditors (suppliers) where possible.
- Often the only creditor left unpaid at the start of the liquidation is HM Revenue & Customs for Corporation Tax.
- A Members Voluntary Liquidation should only be used where all creditors have been paid in full or will be paid in full with interest within 12 months of the date of liquidation.
KEY POINTS TO USING KIRKS FOR YOUR Members voluntary liquidation
As experienced Licensed Insolvency Practitioners we are expertly equipped to deal with Members Voluntary Liquidations and have found the following very important to our clients:
- We will pay the shareholders out fast – usually within seven days.*
- We aim to get you to do most of the work before hand to reduce our fees.
- Liquidation fees can be fixed – so no hidden costs.
- We do not charge for letters/stamps/storage boxes. Our fees are very clear.
*You will need your accountant to confirm the company tax bill to do this.
A Word Of Advice
Make sure when choosing a suitably qualified and experienced liquidator that he or she is a properly “Licensed Insolvency Practitioner”. There are a number of firms advertising themselves as “licensed” but all they have is a consumer credit licence. Their objective can sometimes be to just charge you a fee and pass you onto someone else.