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How to safely Liquidate a Limited Company with Assets

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. 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.

Another advantage to a formal winding up 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 contingent creditors to make a claim. 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.

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Members Voluntary Liquidation in Detail

A Members Voluntary Liquidation needs a licensed insolvency practitioner 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.

Usually, the proposed liquidator will prepare all the statutory paperwork and meet or discuss the process with the director/shareholders. A fee is usually agreed in advance for the liquidation.

The important issues for directors of a limited company to consider are:

  • Getting an accurate up to date balance sheet showing all the assets and liabilities. This is needed for the statement of affairs.
  • Having available all the names and addresses for 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 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 H M 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 within 12 months from the date of liquidation.

Key Points to Using Kirks for your MVL

As experienced and 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.*
  • Aim to get you to do most of the work in order to reduce our fees.
  • Liquidation fees can be fixed – so no hidden costs.
  • We don’t charge for letters/stamps/storage boxes.

*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.

If you would like to know more about Members Voluntary Liquidation contact us today. We can help you find a positive outcome whatever your situation.

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