15th April 2021
Members voluntary liquidation (MVL) can be used as an effective way to close down a company and convert its asset into cash that can be distributed amongst shareholders. A company can only enter an MVL if the directors are able to draft a Declaration of Solvency – a document which essentially states that the assets and liabilities of the company have been reviewed and it the directors have concluded and swear to the fact that company has enough value to repay any existing and prospective liabilities while also distributing funds to shareholders.
The main benefit of an MVL is that it allows the shareholders to extract the value of the business as cash efficiently. In addition, the funds realised through the liquidation sale of assets are taxed as Capital Gains and not as Income, which means there is a significant tax saving in comparison to withdrawing the value of the business in the form of dividends outside of a liquidation.
Other than the liquidator's fee the main members voluntary liquidation fees are the disbursements, which include 4 different Gazette notices, which cost about £60 each + applicable VAT charges, a small search fee of about £3, and a bond with a variable premium that depends on the company's asset value but usually costs several hundred pounds.
The cost of an MVL will vary depending on a several factors, including whether the company has been prepared as a “cash shell,” the value of the company's assets, and the liquidator appointed to carry out the procedure. Generally speaking, members voluntary liquidation cost will be about £4,000 in liquidator fees plus the cost of the aforementioned fees, notices, and the bond premium.
The liquidator charges fees for carrying out the process of drafting and submitting the appropriate members voluntary liquidation forms and facilitating the rest of the procedure as well. If the company is indeed solvent then these fees should be nominal in comparison to the amount of money that will be distributed to shareholders.
The liquidator also has to handle members voluntary liquidation filing accounts and all of the other technicalities. Your job as a company director would be minimal and would involve consulting with an insolvency practitioner and providing any requested information that is necessary to carry out the procedure.
If you're interested in initiating a members voluntary liquidation or you have questions about the cost of doing so, feel free to send us an email or call us on 0800 644 6080 for free confidential advice. With 100 offices across the UK, you’re never far away from expert and confidential advice.