Types of voluntary liquidation
Members' Voluntary Liquidation
- Tax advantages
- Payment after 35 days
- Not tax avoidance
Creditors' Voluntary Liquidation
- No assets
- No employees
- Up to 10 creditors
- Complex cases cost more
Depending upon the total value of assets in your company, using a Members’ Voluntary Liquidation (aka a solvent liquidation) could be the most tax efficient way to close your solvent company.
This is because the funds to be distributed are subject to Capital Gains Tax, rather than Income Tax. Also, if you qualify for Entrepreneurs’ Relief (as most of our clients do) you can benefit from a 10% marginal rate on distributions.
In determining whether an MVL would be right for a particular situation, we would leave the tax calculations to your Accountant. Where it is deemed that an MVL is the best solution, an Insolvency Practitioner (like us) must (by law) be used.
We aim to distribute the assets of the company after 35 days from the date of Liquidation.
If your insolveny company needs to be liquidated and you care about your future business reputation, you are far better to liquidate your company voluntarily with a Creditors’ Voluntary Liquidation (CVL).
A director can propose a CVL if:
- their company can’t pay its debts – i.e. it is ‘insolvent’
- the shareholders agree and pass a ‘winding-up resolution’.
If a company does go into CVL, it means it will stop trading and be liquidated – i.e. ‘wound up’.
A CVL acknowledges your duties as a director to your creditors.