Voluntarily entering into liquidation may well seem like a step backwards for many, but there are some benefits not to be ignored.  A solvent liquidation, which is often referred to in professional terms as a Members’ Voluntary Liquidation, is a way of winding up the business while at the same time letting the shareholders maintain autonomy over proceedings.  If you know that your business isn’t performing well, then a Members’ Voluntary Liquidations will enable you and your shareholders to sell off the assets and distribute cash appropriately.

As with any insolvency practice, a licensed liquidation professional is of course required to oversee proceedings, but this is a mature and controlled way to leave a business when it is under-performing.  Of course, there are other reasons directors and shareholders may choose to wind up a company. They may feel that the business has come to the end of its natural life (i.e. a product or service is no longer relevant and the business can’t ‘evolve’), or they might be considering retirement options. Solvent liquidation can even be a useful tool when restructuring a business, trying to reign in debt and generate capital.  Regardless of the reasons for choosing solvent liquidation, there are benefits to taking the wheel:

  1. It’s tax efficient.  Member’s Voluntary Liquidation is the only possible way of distributing assets to shareholders as ‘capital receipts’ instead of income, saving on tax all round.
  2. Entrepreneurs Relief is available to certain businesses, and can be applied to all assets worth over £5k, furthering the tax advantage.
  3. You can restructure groups of companies if you like.  Assets can be sold and the revenue can be distributed into newly formed companies (this requires an S110 agreement). A great way to restructure or come up with a new business strategy.
  4. Usually a company will have to comply with reporting regulations which can prove costly. With Members’ Voluntary Liquidation this process is completely eliminated, streamlining the process altogether
  5. The whole process of liquidation can be over relatively quickly following the appointment of a liquidation professional. All that’s required is a meeting of directors to establish the declaration of insolvency, then a shareholder meeting to pass resolutions and get the liquidator up to speed, and finally a meeting to organise the distribution of assets after the formal winding up of the business.

If you are a director whose company is seriously considering Members’ Voluntary Liquidation, then be sure to get in touch with a qualified liquidation professional who can guide you through the process. There may be many avenues open to you which you’re not currently aware of and making sure you have all options at your disposal is a definite advantage.

One last tip – be sure you redistribute all of the company’s assets as any that are left will be passed on to the crown as ‘owner-less goods’ and lost entirely.

Post Comments

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.