Members' Voluntary Liquidation

Members’ Voluntary Liquidation for Contractor Limited Company (Replacing the old ESC-C16)

What is a Members’ Voluntary Liquidation (MVL)?

MVL is a solvent solution and can only be used where a company’s assets exceed its liabilities (including potential liabilities).  During the process the directors must sign a declaration of solvency to confirm this.

Reasons for liquidating a Contractor Limited company?

There are many reasons why a MVL may be appropriate, however the most appropriate for a Contractor Limited Company:

• Where the life of a project/contract has come to an end, MVL’s can minimise the tax liabilities that may fall on shareholders resulting from the distribution of its assets.

Advantages of a MVL

• A liquidation process however has the following advantages:

• No restrictions on when a company may  initiate the procedure;
• The company’s capital can be distributed;
• It can be used for complex tax efficient restructuring;
• The process must be dealt with by a Licenced Insolvency Practitioner who will ensure that the correct process is followed and therefore the risks to shareholders and directors minimised; and

What happens during the process?

The decision to liquidate should only be taken after full review of the company’s situation, eg. Post end of contract or project and after taking advice from experienced professional advisors.

Once the decision has been made then steps will be taken to set up meetings of the company’s shareholders.  Where the liquidation’s objective is to deal with a closure of the business, the directors may at this stage wind down any remaining operations or where a restructuring is to be undertaken the relevant legal paperwork drafted.

Prior to the shareholders’ meeting, a declaration of solvency stating the company’s assets and liabilities and confirming that all creditors will be paid within 12 months would be prepared and signed by the directors.

At the meeting, shareholders vote on resolutions to place the company into liquidation, appoint a liquidator and on any other matters relevant to the circumstances.

Following the liquidation meeting, the liquidator would sell, collect or distribute any remaining assets of the business or formalise a restructuring of the business.  Once liabilities have been provided for or paid, the liquidator may distribute the company’s assets, including any cash held, to its shareholders.

How does it end?

Once all matters have been dealt with the liquidation ends and the company is dissolved approximately three months later.