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Members’ Voluntary Liquidation

Do you need to voluntarily close down a company that is solvent?

For over 17 years, Bridgestones has helped companies like yours with Members’ Voluntary Liquidations. There are many reasons why a Members’ Voluntary Liquidation could be the correct solution for you - and we have seen many scenarios in our time.

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What is a Members’ Voluntary Liquidation

Members’ Voluntary Liquidation is the process of closing down a company that is solvent. This means that a company must be capable of meeting its financial obligations, such as tax and wages, and the value of its assets exceeds the total sum of all its debts and liabilities. (Assets can include company equipment, vehicles, stock, contracts, invoices, bank account funds and property). If this is not the case and the company is insolvent, then it cannot be put through a Members’ Voluntary Liquidation and it must instead be put through a Creditors’ Voluntary Liquidation.

During a Members' Voluntary Liquidation we would act as the company liquidator. Our role would be to close down the company, 'liquidate' company assets, and distribute the proceeds amongst company members.

What Is the Difference Between Members’ Voluntary Liquidation and Creditors’ Voluntary Liquidation?

Members' Voluntary Liquidation is the formal process of voluntarily closing down a solvent company. Creditors' Voluntary Liquidation is the formal process of voluntarily closing down an insolvent company. Our role as an appointed liquidator differs between these two types of voluntary liquidation. During a Members' Voluntary Liquidation, we distribute funds raised from the sale of company assets amongst company members. Whereas, during a Creditors' Voluntary Liquidation, we distribute the funds amongst creditors in order to pay off company debts.

Advantages of Member's Voluntary Liquidation

  1. A tax efficient way to close a solvent company.
  2. An immediate first distribution can be made if funds permit.
  3. Can transfer assets to another company.
  4. You may be able to take advantage of entrepreneur’s relief.

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The Members’ Voluntary Liquidation Process

Seek the advice of an insolvency practitioner
Firstly, you should contact a licensed insolvency practitioner for their advice on the Members’ Voluntary Liquidation process. We have years of experience as insolvency practitioners in advising clients of all sizes on company liquidation. We can offer advice and guidance on whether your company is in a position to enter into a Members’ Voluntary Liquidation, and what you can expect as a result of the process. For detailed information and advice for your business, simply get in touch with us via telephone, email or online live chat.

Declaration of Solvency
As your appointed liquidator, we would assess your company and its finances to determine that it is indeed solvent. The company directors must sign a Declaration of Solvency, which states that they have thoroughly reviewed the company's balance sheet and finances, and have concluded that it is solvent. The company must be in a position to reasonably repay all existing and prospective debts within a period of no more than 12 months.

The company must be solvent throughout the entire Members' Voluntary Liquidation process. If additional creditors come forward to make a valid claim against your company after the liquidation process has started, and this pushes the company into insolvency, a creditors' meeting will be held and the procedure will become a Creditors' Voluntary Liquidation.

Members’ meeting
Within 5 weeks of issuing the declaration of solvency, the directors of the company must pass a resolution at a members’ meeting to officially begin the winding up process. Usually, 21 days’ notice must be given for the meeting to take place. This can be shortened in certain circumstances.

We can help you to draft a winding up resolution which includes details about the winding up process, the appointment of ourselves as liquidator, the agreement to distribute certain assets and details of the liquidation costs and expenses. We will then distribute this amongst members. If 75% or more of company members vote in favour of the winding up resolution, then the company is immediately put into Members’ Voluntary Liquidation.

The liquidation of the company
Once the winding up resolution has been passed, we must advertise it in The Gazette within 14 days, and file it with Companies House within 15 days.

As the company liquidator, we would invite all known creditors to make their claims by a certain date – usually within 21 days.

We will then act to realise the value of company assets in order to pay debts owed to creditors and then distribute leftover proceeds to company members.

Final meeting
Once we have received tax clearances from all government departments and ensured that there are no further claims from any other creditors against the company, we will call a general meeting of the company. During this meeting we will detail our account of how the liquidation process has been managed. Within one week of this final meeting, this account will be filed with Companies House. The company will then be dissolved, removed from the register at Companies House, and it will cease to exist.

The completion of this process will mean the ending of the company. However, through this process members are able to extract the value of the business in the form of cash. Also, instead of being charged Income Tax on the funds that you receive as a member, you will be charged a Capital Gains tax. This means that you will save money on taxes in comparison to extracting the value of the business in the form of dividends shared out amongst shareholders, which would be charged as Income and has higher taxes.

How Long Does It Take For Members To Receive Their Funds From The Liquidation?

The amount of time it takes to receive funds from a Members' Voluntary Liquidation does vary depending on the case and the speed at which your bank releases the funds to us. So, as the process isn't 'one size fits all', we can't really give an exact timetable for the release of funds to members in a Members' Voluntary Liquidation. It is fair to say, however, a first distribution can usually be made within 1 to 2 months if the funds are available and the balance paid when all procedures are completed.

How Much Does a Members’ Voluntary Liquidation Cost?

There are costs for a Members’ Voluntary Liquidation associated with appointing an insolvency practitioner as the liquidator for your company. Costs vary from case to case depending on the complexity of the situation and the assets that need to be liquidated. For a more accurate indication of what Members’ Voluntary Liquidation could cost your company, you can contact us at any time via telephone, email or online live chat.

So What Should You Do Next?

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