What is the Process of Voluntary Solvent Liquidation?

A business doesn't need to be insolvent to go into liquidation as with voluntary solvent liquidation the company can be put to stop when directors think that the business is not viable anymore. There can be different reasons to choose for the MVL such as personal reasons, unviable business, retirement plans, and many others.

In any of these situations if a business has relevant assets that are required to be distributed among the members or other related parties the process of voluntary liquidation can take place. 

The company that chooses to go into this type of liquidation has to appoint an authorized insolvency practitioner to take care of the interest of the directors, creditors as well as shareholders. The whole process works as per the provisions of section 110 of the insolvency act 1986 and the company must be solvent to carry out this process.

Declaring Solvency - The first step for going into the Voluntary Solvent Liquidation is to declare the solvency of the company by its directors. A final account statement is prepared to prove the fact that the company is not on the virtue of insolvency and a proper declaration should be made about it in front of a solicitor or notary. If the company is having more than one director then the majority of its director must become part of this declaration so that the process can commence. 

Meeting of the Shareholders - Within five weeks from the declaration of the solvency, it is required to call the meeting of the shareholders to pass the resolution for MVA. Once the resolution passes a qualified insolvency practitioner or liquidator will be appointed to carry out the proceedings.

Appointment of Liquidator - Appointment of the liquidator is very crucial for successful voluntary liquidation. He should have proper authorization and qualifications to carry out the process. It is his responsibility to realize the assets and settle any claims by the creditors of the company before completion of the process. 

Publication in the London Gazette - Once the appointment of the licensed insolvency practitioner is done it is compulsory to notify it in the London Gazette. The publication should take place only when the formalities concerning the appointment of the liquidator are completed. It is mandatory to publish this appointment even if voluntary solvent liquidation is carried out to close any nonperforming subsidiary of the company.

Realization and distribution of the assets - After the above steps are completed it will be the responsibility of the Liquidator to realize the assets of the company so that distribution can be made to shareholders. All claims from the creditors should be addressed before evaluating the final value of the assets. The liquidator has an option to either distribute the assets without selling them or distribute the money raised from selling the assets of the company.

It is always a wise idea to choose MVL over the other forms of liquidation as it helps you to evade the taxations on the realized assets. Under it, the assets which are realized are treated as capital not income which reduces the tax liabilities for the shareholders who receive it as a capital gain. It also allows the director to claim Business Asset Disposal Relief which brings the tax liabilities to a considerably smaller scale. Contact the team of Simple Liquidation today to hire insolvency practitioners for carrying out Member Voluntary Liquidation for your company.