At TruSolv, we provide essential advice and guidance for UK businesses facing the multiple challenges of creditor pressure, actual or potential insolvency and the threat of liquidation. We also advise company directors to wind up the affairs of a solvent company, through A Members’ Voluntary Liquidation or MVL.

The solvent company has come to the end of its natural life and the MVL process brings the company to a formal end. The process distributes any remaining assets to its shareholders, allowing them to realise their investment in a tax-efficient manner.

Over the years, our team has been asked many questions about the MVL process. In this blog, we’ve answered the five most common questions we’re asked about MVL.

Is an MVL suitable for all solvent companies?

An MVL can only be used by a  company that is in a position to pay all of its debts plus interest within 12 months. The directors must swear a declaration of solvency to this effect.  Where a company has reserves of less than £25,000 it is likely that a simple strike off may be the most cost-efficient way to close down the company.

Can a solvent company be closed via dissolution?

Dissolution is one way to close an unwanted company. The company will be ‘struck off’ the official register at Companies House and will cease to exist. This process is carried out by the company directors, who are responsible to take out specific actions in order to comply with company law on dissolution.

An MVL will be managed by an insolvency practitioner (IP). The IP will ensure all statutory requirements are met when closing the company. Aside from who is managing the process, the key difference between the two is how the assets are distributed to shareholders and the tax treatment. In an MVL, distributions are taxed as capital rather than income. In most cases the shareholders will be entitled to business asset disposal relief, meaning tax on the capital distribution at only 10%.

Why does a solvent liquidation have to be led by an insolvency practitioner?

Despite its solvent nature, the MVL process is laid down in the Insolvency Act 1986 (“IA86”). As a formal procedure, a licenced IP is therefore needed to administer an MVL. The role of the IP ensures that the use of an MVL is correct for that company and that all statutory requirements are met.

What will an MVL cost?

The cost of an MVL will depend on the complexities of the case, what assets need to be distributed to shareholders, and how many shareholders there are. Please contact us for a quote and to discuss specific requirements.

How quickly can shareholders get paid?

In most cases the majority of funds will be distribute to shareholders shortly after the liquidators have been appointed. The full timeline for an MVL from start to completion is typically between six months and a year, but this depends on the complexity of the business. You can read about the timeline of an MVL and the key steps in the process here.

We’ve created an advice guide specifically about Members’ Voluntary Liquidations. Download your copy here.

If you would like to discuss an MVL for your company, call 0808 196 8676 or email help@trusolv.co.uk.