Members Voluntary Liquidation (MVL) is a process used to wind up the affairs of a solvent company. The MVL process is normally used when a company has come to the end of its natural life, where reorganisations have taken place resulting in dormant companies or the procedure can be used as part of a restructuring process to facilitate the reorganisation of a business by divesting different trading activities to separate limited companies. This type of transaction is usually complex and requires additional documentation and prior clearance from HMRC.
The MVL process effectively brings the company to a formal end and distributes any remaining assets through a cash dividend or in specie to its shareholders. The MVL process facilitates a controlled shareholder exit, allowing them to realise their investment in a tax effective manner.
An MVL is not appropriate where the company will be unable to pay its debts in full, together with any interest within a 12-month period. Indeed if the assets to distribute are less than £25,000, these can actually be distributed without the need for a formal MVL and the costs of engaging a licensed Insolvency Practitioner. Using an extra statutory concession in such circumstances these distributions will receive ‘capital treatment’.
By David White a Partner in Charterhouse, based in Beaconsfield
