Everybody imagines what life would be like if they made different choices.
If they took one job instead of another, bumped into a different person in the queue for a coffee that day and got their number instead of the person they ended up marrying who had stood behind them.
It’s the same if you’re the owner or director of a business. What if you had produced this product six months before you did? What if you’d sourced a supplier in the UK instead of in China? What if you hired someone different in a critical position?
Directors are unique in that they have the most responsibility in a business and these decisions carry the most weight.
One thought they might come back to time and time again is what they could do with the additional time and income if they closed their current profitable business.
They could chase the excitement and thrill of beginning a new venture from scratch and building it up; they could take the time to pursue other personal ambitions such as travel or spending more time with family or they could decide to become a consultant and work how and when they want.
There are numerous options available to them but the first thing they should consider is how they could bring this vision to reality.
And that’s through using a process called a Members’ Voluntary Liquidation or MVL.
What is an MVL?
One thing to always remember about an MVL is that it is a formal insolvency process and as such has to be completed by a qualified and licensed insolvency practitioner (IP).
They can be selected by the business owner or director but it is their legal duty to take the company through its closure, called a liquidation, and to complete all the associated tasks involved including winding the business up and finally distributing the assets of the business.
An MVL is only available to solvent companies – those that can reasonably settle their debts within a 12 month period. The first task of the appointed IP will be to settle any outstanding business debts and legal disputes before paying off any creditors through the proceeds of profits and the sale of assets.
Any remaining funds will then be distributed to the company’s shareholders.
How does an MVL work?
There are several stages that have to be followed before an MVL can be completed.
- Declaration of Solvency – The directors/shareholders of the company make a formal declaration stating that they have thoroughly examined the financial situation of the company and believe that it will be able to pay its debts in full within a specific period, which would usually be 12 months from the start of the liquidation procedure.
- Shareholders Meeting – A meeting of the company’s shareholders is convened in order to pass a resolution to wind up the company voluntarily and appoint a liquidator. Depending on the number of shareholders the meeting to place the company into an MVL can be held almost straight away.
- Appointment of a liquidator – The shareholders appoint their chosen IP who will then take charge of the liquidation process. They will begin by realising/selling the company’s assets and settling its outstanding liabilities before finally distributing the remaining funds to the shareholders.
- Realising the assets – The liquidator identifies, values, and then attempts to sell the company’s assets, which can include property, equipment, investments and any intellectual property. The proceeds from the asset sales are collected and held in a separate bank account known as a liquidation account.
- Distributing the assets – once all the company’s debts are settled, the liquidator distributes the remaining funds to shareholders according to their respective shareholdings or as specified in an approved liquidation plan.
- Winding the company up – after all assets have been realised, debts settled and funds distributed, the liquidator has to obtain final clearance to wind up the company from HMRC. Once this is obtained, the case is officially closed and the company will be formally dissolved three months afterwards.
With the first slim signs of approaching summer starting to appear and you find your thoughts turning towards “what if…?” then you should act on that impulse and get in touch with us.
Whether it’s about closing through an MVL or other insolvency process or anything else that could help improve or strengthen the business – a conversation with one of our expert advisors will help focus you on the most important choices you could make for you and your company.
Starting that chat with us that could change you and your business’s future for the better…