MVL

Solvent (Members’ Voluntary) Liquidation – what is the procedure?

Members Voluntary liquidation is a process where-by all the shareholders within the company make a decision to liquidate the company, with their being adequate assets within the company to pay off any remaining debts, therefore the company being solvent.

After the decision has been finalised by the team of directors to allow the company to go into (MVL) members’ voluntary liquidation, you should then seek advice from a Licensed Insolvency Practitioner (IP). Due to the procedure of the solvent liquidation very much resembling an insolvent liquidation, it is illegal for anyone other than an IP to act as a liquidator. In any pending case, the IP will work directly with the company’s directors throughout the period leading up to the official date of the liquidation. They will ensure that the standard policy is adhered to and all the appropriate documents are correctly drawn up. The procedure is as follows:

1. A board meeting must be organised to confirm the decision of liquidation. The IP will again be involved, preparing the minutes, confirming the directors resolved. 1) Preparing a declaration of the solvency. 2) To then proceed to convene an (EGM) An extraordinary general meeting that will take place with all of the shareholders, to affirm a resolution to wind up the company, and finally. 3) Instructing the IP to aid the directors in the process.

2. The IP will then assist the directors in drawing up a Declaration of Solvency. This declaration must then be adhered to by the majority of the company’s directors, it must then be proved that the directors have made a full and thorough enquiry into the company’s standing affairs, and are of the collective opinion that the company is completely able to repay its debts within twelve months of the liquidation date. As the document is a legally binding document that has been filed at Companies House, there are serious penalties issued against any directors who choose to swear the document negligently.

3. With the assistance of the IP, a following EGM shall be called. The meeting should be called giving fourteen days notice to pass a special resolution to wind up the company, however, not more than five weeks after the issued date of swearing the declaration of solvency. If the shareholders decide by unanimous decision to a written resolution, then an EGM need not be called and the date of the liquidation will then be confirmed on the date the final shareholder signs the written resolution.

4. Accounts and corporation tax returns must then be prepared to the date of liquidation. These must then be submitted for agreement with HM Revenue and Customs and pay any tax that maybe due from there on. Once the Liquidation has been formally issued a new accounting period must proceed from that date. Liaisons must then take place with the company’s tax advisers and advice should be taken on board as to any implications of change of accounting date, prior to proceeding with the liquidation.

5. All the statutory filing of any relevant documents and publications of required notices shall be dealt with directly by the appointed liquidator. He will then proceed to deal with the realisation of the company’s assets by agreeing and paying any liabilities that maybe outstanding, whether he was previously aware of, or that have subsequently come to his attention. Once the liquidator is then in a position to, he will pay all the costs involved in the liquidation and continue to distribute any remaining funds between the shareholders, according to their shareholdings and rights under the company’s articles of association. It is completely down to the liquidator and the shareholders to decide when the distributions can be granted to take advantage of tax allowances.

6. Once the liquidation has been finalised, the liquidator will call a concluding meeting with the shareholders, to acquire his report and then approve his given account of the liquidation and his fee for the process. This will result in the company being automatically dissolved by the Registrar of Companies, three months after the concluding meeting has been held.