When we are arranging the distribution to shareholders in a Members’ Voluntary Liquidation (MVL), there are sometimes delays which are caused by the banks. These are out of our control and very frustrating for us and our clients.
So, we have now have three options for distributing the funds of the company.
1. We will request that the company bank account is closed and the funds held in the account are forwarded onto us as Liquidators of the company. The funds will be held in a Specific Client Account for the company (which is an interest bearing account).
We aim to distribute the assets of the company after 35 days from the date of Liquidation.
It is important to be aware that, with this option, the timing of the distribution is dependent on the speed at which the company’s bank acts – something over which we have no control.
In order to remove the uncertainty of the speed that banks act, the following two options are available.
2. If the company has one shareholder or husband/wife shareholders, they take the money out of the business bank account before we are appointed.
We will then distribute the Overdrawn Director’s Loan Account (ODLA) after 35 days from the date of Liquidation. This distribution is merely a paperwork exercise.
A supplementary set of accounts and corporation tax return will need to be prepared by your Accountant, up to the date the company ceases to trade and recording the final transaction (i.e. reflecting accurate details of the ODLA).
3. If the company has multiple shareholders, they transfer the money out of the business bank account into Clarke Bell’s General Client Account before we are appointed.
Once appointed, we will transfer the funds into a Specific Client Account.
After 35 days from the date of Liquidation the funds will be distributed to shareholders in full.
Under the Insolvency Act, we cannot distribute the funds prior to end of the advert in the Gazette which has to run for a clear 21 day period.
If a creditor does come forward with a valid claim, the shareholder(s) would need to pay them in full before the distribution. For shareholder(s) to claim Entrepreneurs’ Relief, we have to distribute the ODLA as capital and this would not be done this until all creditors were paid.
We are aware that some Insolvency Practitioners distribute an element of the funds prior to this being concluded. However from our experience we are not comfortable with this approach because we know of instances where creditors have come to light and have required payment before we can distribute assets to shareholders.
We believe it is more prudent, for all parties concerned, to adopt one of the above three options.
More control with the distribution of funds in an MVL
These options give shareholders the choice of how to get the money out of their limited company, without having to be at the mercy of the banks’ timescales. This is especially advantageous when the funds are needed for specific purposes – such as to purchase a house.
Each of these approaches can all be done within our normal MVL cost of £995 (+VAT +disbursements).
For more information about MVLs, contact Clarke Bell 0161 907 4044 or [email protected]