If you’re a sports fan one of the most interesting conversations is when you talk about undefeated competitors and seasons. 

Arsenal’s invincibles from 2003/04 will go down in history for their unbeaten premier league season. 

Rocky Marciano is the only undefeated professional heavyweight fighter who ended with a record of 49-0. 

American hurdler, Ed Moses went unbeaten over a stunning 112 races over 10 years. 

All of these records are amazing but Arsenal lost to Manchester United and Middesbrough, twice, in the cups that season; Marciano didn’t get to the magical 50th fight and Ed Moses was finally defeated in 1987. 

Even if you manage to end on your own terms, there’s still one undefeated opponent who will catch up to us all eventually – and that’s time. 

That’s why it’s so important for business owners to consider what the future of their business is going to look like once they have retired, especially when it comes to the issue of releasing any value that is held within the business. 

You may have already decided who your next-in-line will be but for owners who don’t have a viable succession plan or don’t wish to hand over the reins, they might decide to close the business and if that’s the case then a Members Voluntary Liquidation (MVL) may just be the best option. 

What is a Members Voluntary Liquidation (MVL)? 

An MVL is a voluntary closing down process, still carried out by an insolvency practitioner (IP), which allows a solvent company to be closed effectively and quickly.

The process can also be initiated by the shareholders although this requires a 75% majority of all members must consent for the MVL to go ahead. 

Once the owners and directors have settled on an IP, they will first settle outstanding debts, legal disputes and pay creditors through profits and the sale of assets. The remaining funds will then be distributed to the members.

Why choose a MVL?

There are several reasons why directors should consider an MVL:-

  • Tax efficiency

Depending on their circumstances, shareholders could benefit from specific tax advantages as any distributions are treated as capital gains rather than income and would be taxed at a different rate. You should consult your accountant for specific tax advice first.

  • Protection 

In a compulsory liquidation or a creditors voluntary liquidation (CVL) process, the insolvency practitioner overseeing matters is legally bound to submit a report on directors conduct to The Insolvency Service based on their actions leading up to the liquidation. 

This could be worrying for them even if they have been attending to their directors duties diligently but in an MVL, there is no risk of any personal liability for any director as they have made the decision to close themselves, the business is solvent and therefore no report is necessary.

  • Simplified and orderly process 

In comparison to other forms of liquidation an MVL is usually less complex and is a controlled procedure. This can be beneficial for the company’s reputation as well as being able to manage the impact on employees, suppliers and customers ahead of any liquidation.

Everybody imagines retirement to be a lovely, relaxing time with nothing to do but whatever the retiree wants. 

While that isn’t the case for 99% of retirees, the weeks, months and even last couple of years before the event can be some of the most stressful of their career – especially if they haven’t got a contingency plan for succession in place. 

This is another reason why anybody contemplating closing their business, for whatever reason, should get in touch with us. 

We offer a free consultation for any business owner or director that wants to make changes to their business

We’ll talk through your ideas and plans and work on a strategy to make it a reality so you can concentrate on the other important duties you’ll have with hopefully, a lot more free time!