What is a Members Voluntary Liquidation?
Winding up the affairs of a solvent company
A Members Voluntary Liquidation (‘MVL’) is a process used to wind up the affairs of a solvent company, i.e. one that can pay its debts in full.
An MVL is typically used where a company has (or multiple companies have) come to the end of its useful life. For example, the business and/or assets of a company being sold leaving only a ‘shell’; or a cumbersome corporate structure requiring simplification to reduce administrative costs; or there is a desire to move assets or value within a corporate structure.
The MVL process facilitates a controlled exit allowing the shareholders or parent to extract the cash or assets in their business in a tax-effective manner. There are often substantial tax advantages in conducting an MVL as the value that will be distributed to shareholders represents a return of capital, rather than dividend income which typically attracts a higher rate.
The process also provides greater protection for directors and shareholders than a dissolution application made without following a liquidation procedure.
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