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Members' Voluntary Liquidation: Understanding Disbursements

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Understanding disbursements in an MVL process

Disbursements are the additional costs (not including the professional fees of the insolvency practitioner) which are unavoidably incurred during the process of placing a company into an MVL. Disbursements are third party costs including the price of a statutory bond and advertisement notices in the Gazette. These costs will need to be paid by the directors of the company being liquidated.

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What are disbursements in a Members' Voluntary Liquidation (MVL) process?

The main cost involved in placing your company into Members’ Voluntary Liquidation (MVL) will be the liquidator’s fees for handling the process. The exact fee amount varies depending on the complexity of the case, which includes whether there are any outstanding creditors to deal with. However, you should look to negotiate a fixed fee with your insolvency practitioner so you know exactly what these are going to be ahead of time.

In addition to the liquidation fee, there will be smaller additional costs to pay; these are known as disbursements.

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What are disbursements?

Disbursements are a series of unavoidable third party costs which are incurred by the liquidator during the course of placing the company into an MVL. These costs will initially be paid by the insolvency practitioner who will then charge these amounts back to you as the client.

What sort of disbursements may be incurred during an MVL?

As part of an MVL, the liquidator is obliged to publish a series of notices in the Gazette in order to make the liquidation public knowledge. This needs to be done so that any outstanding creditors can submit a claim for monies owed before the company is officially closed. A total of three of these notices – on appointment, resolution and one to serve as a notice for claims – must be taken out. An additional advert must be placed for those companies registered in Scotland.

Exact prices for these can differ slightly depending on which agent is used to place the adverts, however, they are typically around £89 + VAT each.

What is a statutory bond in an MVL and what does this cost?

As part of the MVL, control of the company along with its retained profits and other assets, will become the responsibility of the appointed insolvency practitioner. Due to this shareholders are required to take out what is known as a statutory bond.

In essence a statutory bond can be seen as a form of insurance which protects your company’s capital while it is in the hands of the liquidator in the event of malpractice. It is a legal requirement that a statutory bond must be taken out upon an insolvency practitioner being appointed to handle a solvent liquidation.

The cost of bonding operates on a sliding scale based on the asset level of the company. This can range from £40 at the lower end of the scale, to over £600 for those companies with several million pounds to distribute.

When will I need to pay the disbursements?

Upon appointing an insolvency practitioner you may be asked to sign an indemnity (in case of unforeseen creditor claims), following which a significant portion of the company’s assets (usually cash at bank) will be distributed to the company’s shareholders. The remainder will be held back by the insolvency practitioner until proceedings have concluded.

This retained amount will be used to settle the liquidator’s fees along with any disbursements once the liquidation is formalised. If there are any remaining funds still being held by the liquidator once these costs have been paid out, this money will be distributed amongst the shareholders accordingly and the company will be officially dissolved.

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