What is an MVL?
An MVL stands for a Members’ Voluntary Liquidation and can be one of the most tax-efficient ways to close down a solvent company. An insolvency practitioner must be used if you want to close your company via an MVL and the assets of the company are usually distributed after 35 days from the date of Liquidation.
By using an MVL the funds to be distributed are subject to Capital Gains Tax, rather than Income Tax. And if you qualify for Entrepreneurs’ Relief (ER) you can benefit from a 10% marginal rate on distributions. This means there can be considerable tax savings for the director(s) of the company.
What is a declaration of solvency?
Only solvent companies can be liquidated via an MVL. As part of the process, a ‘declaration of solvency’ must be sworn by the company directors, in front of a solicitor or notary, swearing that their company is solvent. By signing a declaration of solvency, it confirms that the company is able to settle any liabilities within a maximum period of 12 months following the beginning of the liquidation.
What is a statement of assets and liabilities?
A statement of assets and liabilities provides a complete overview of where the company is financially, taking into account the cost of the liquidation process plus any interest due to creditors. This allows shareholders to get an accurate depiction of what the capital distribution sum is going to be.
What happens if I declare my company solvent – when it’s actually insolvent?
It is a criminal offence to sign a declaration of solvency relating to an insolvent company either knowingly or unknowingly. Any directors who do so can be faced with:
- a fine
- disqualification from acting as a director in the future
- Imprisonment (in the most serious cases)
So it’s really important to make sure your company qualifies for an MVL by instructing the help of Licensed Insolvency Practitioners from the very beginning.
For help with a Members’ Voluntary Liquidation (MVL) contact us at Clarke Bell.