Extracting funds via a Members' Voluntary Liquidation

5th February 2019

A Members' Voluntary Liquidation (MVL) enables shareholders to put a solvent company into liquidation in order to unlock their capital in a tax efficient manner, as an alternative to selling their shares.

It can be used to secure an orderly winding up of a company or to close down a subsidiary that's perhaps outlived its usefulness.

The Restructuring team regularly implement and manage MVLs, which require the appointment of a Licensed Insolvency Practitioner, for both clients of Bishop Fleming and external referrers.

In 2018 we had 36 live MVL cases and we distributed over £36m to the shareholders of these companies.

Entrepreneurs' Relief

The shareholders in the majority of these cases qualified for Entrepreneurs' Relief, meaning that they could extract their capital through the liquidation process at a tax rate of 10%, enabling tax savings of approximately £8m.

Had they drawn the funds as dividend income and then simply struck off their company, not only would their tax liabilities have been significantly higher, they would have left themselves exposed (the same applies to the director) to future actions against the Company and the possibility of Company restoration.

A MVL thus provides the directors and shareholders with the comfort that the Company's affairs have been finalised in an orderly and structured manner.


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