The liquidator must ensure that the company remains solvent throughout an MVL procedure. It’s possible that after the MVL is advertised publicly, additional creditors may come forward and submit claims against the company, turning it into a CVL. Alternatively, the valuation of contingent liabilities may reveal that prospective debts will push the company into insolvency. Whatever the cause, if the company does become insolvent or is found to be insolvent by the liquidator, a creditors’ meeting will be held and the procedure could turn into a CVL.
The liquidator has to make sure that the company remains solvent throughout the MVL process. It is possible that more creditors could come forward when they that the MVL is being advertised in the Gazette. This can turn the MVL into a CVL.
A creditors meeting will be held if the company does end up going insolvent, or is found to be insolvent by a liquidator, and this could force the MVL into a CVL.
Fines and penalties can be brought into the equation if creditors of the company swear a false Declaration of Solvency to enter into an MVL. This can include stopping people from acting as directors of a UK limited company for up to 15 years. If it is a case of international fraud, imprisonment could be a possibility for the perpetrator.
Why is a Members Voluntary Liquidation tax efficient?
An MVL provides better tax efficiency than other options, such as a strike off, because there is no requirement to pay income tax on distributions to shareholders. Taxes that are present in other solutions do not appear in the MVL because of the Extra Statutory Concessions Order (2012).
Why should I use an MVL instead of striking off?
Striking off can be beneficial for many companies, however, you might not want to strike off if you have a lot of money in your bank account. An MVL provides ease of access to funds and also gives the opportunity for tax benefits.
If your business is sitting on funds of £25,000 or more, they shouldn’t really be entertaining a strike off solution.
Please get in touch, tell us of your situation, and we will be able to work out a fee with you.
Click on the following link for more information on Members Voluntary Liquidations.