The answer to the question of how long a members’ voluntary liquidation (MVL) might take to complete from start to finish depends on a number of factors. However, the short answer is that one could be completed within as little as three weeks. What is involved in the MVL process, why might it be a procedure worth considering and what can you do to expedite one? Read on to find out.
Who Are MVLs For?
MVLs are for companies, not individuals. They’re primarily aimed at businesses which are still trading but which the owner – or owners – would like to liquidate for whatever reason. Sometimes, this is to concentrate on other business interests but, there again, retirement is another common reason to seek one. Crucially, MVLs are not a suitable process to seek when a company is insolvent. In short, they are formal processes designed for solvent companies that have sufficient assets – both liquid and fixed – to pay off all of their debts.
What Is Involved With an MVL?
To obtain an MVL, all of the interested parties – members or shareholders – in the company must be notified. If the members agree, then a professional insolvency practitioner must be appointed to oversee the liquidation process. According to Salient Insolvency, a licensed firm that provides MVL services in the UK, the main benefit of undertaking this form of liquidation is due to its taxation rate. Shareholders get charged tax at 10 per cent following an MVL as opposed to the usual rate for a straightforward dividend.
That said, some people pursue them simply because the company concerned has fulfilled its contractual obligations and the owner just wants it to be wound up formally. To obtain this status, a document called a declaration of solvency must be drawn up with a solicitor. The insolvency practitioner organising the MVL will also need access to bank and HMRC records, director identification documents and all the firm’s financial archives.
How Long Will a Typical MVL Take?
Following the aforementioned declaration of solvency, a minimum of 21 days is required to allow any potential debtors to come forward and make a claim for payment from the company being liquidated. The appointed liquidator will need to advertise the fact that the company is being wound up. Because liquidators often come across additional debts or requests for outstanding payments, an MVL will sometimes take longer than three weeks. Ten to twelve weeks is more realistic but it will depend on individual circumstances and how fast, or otherwise, HMRC approves the process.
Tips For Speeding Up an MVL
Proceed directly from the declaration of solvency to posting a notice of the MVL in the London Gazette. Ideally, you will have settled all of the company’s debts prior to this anyway so there are no complications with fresh claims for payments. Equally, the company’s accounts should be up to date and all tax issues with HMRC will be resolved. This way, it is much more likely that the MVL will proceed without any undue delays.
