How Much Does a Members’ Voluntary Liquidation Cost?

A members’ voluntary liquidation (MVL) allows directors and shareholders to wind up their company. Company assets are sold, and shareholders receive the remaining funds once all debts are paid.

The MVL process must be administered by a licensed insolvency practitioner (IP) who acts as the liquidator (even though this isn’t an insolvency procedure). A business must be eligible for an MVL by fulfilling certain criteria:

• The company must be solvent.
• The company must be able to pay all taxes owed.
• The company must be able to pay all creditors.
• All contractual obligations must be met.

The motion to liquidate must be passed by 75% of voting shareholders. The liquidator reviews all company records and ensures the criteria are met.

Why Should a Company Choose Members Voluntary Liquidation?

Company directors and shareholders may wind up a business for several reasons:

• The owners are ready to retire or move on to a new venture.
• The owners wish to restructure or re-organise a group of companies.
• The company has completed the project it was set up to run – MVL is part of the exit strategy.
• The business involved products or services that are now redundant.

There are distinct advantages to winding up a venture via an MVL.

• An MVL is more tax-efficient than withdrawing funds in the form of dividends, as these are subject to income tax.
• The proceeds of an MVL are taxed as capital gains which is more cost-effective.

An MVL doesn’t damage your business reputation. It’s a winding-up mechanism, not an insolvency procedure, despite the involvement of a liquidator. If members embark on another venture in the future, the MVL will not be an impediment.

A big consideration for businesses in this position is how much does a members’ voluntary liquidation cost?

What Are the Fees Associated with a Members’ Voluntary Liquidation (MVL)?

The liquidator fees cover the following:

• Preparing documentation.
• Realising assets, including valuation fees and any other sales fees, if required.
• Distributing the proceeds to shareholders.
• The cost of any legal disputes.
• Paying creditors if money is owed.

In addition to these fees, there are various disbursements to be paid, all of which will affect members’ voluntary liquidation costs.

Bonding Fee

This is a form of insurance which covers the company during the MVL. The company assets are controlled by the liquidator (IP) during the process. The bond protects against malpractice by the insolvency practitioner.

The precise cost of the bond is determined by asset value. On average, this ranges from around £40 for a smaller company to £500 or £600 for larger businesses.

Statutory Legal Notices

A members’ voluntary liquidation must be advertised in The London Gazette. The cost can be approximately £200 to £600. Three separate notices are required as follows:

• The winding-up resolution which leads to the members’ voluntary liquidation.
• Notice of the appointment of the liquidator.
• Notice to creditors to submit claims for monies owing.

The liquidator must directly contact the creditors to advise them of the MVL, but the Gazette notice is still a legal requirement.

Business Asset Disposal Relief (BADR) – formerly Entrepreneurs’ Relief

When considering members’ voluntary liquidation costs, applying for BADR is a way to maximise profits further. If applicable, this reduces the amount of Capital Gains Tax payable and thus makes a members’ voluntary liquidation even more cost-effective.

However, there are strict criteria for eligibility and your insolvency practitioner will know if this is applicable for you.

How Much Does an MVL Cost?

As the cost of members’ voluntary liquidation is dependent on several factors, the total amount can vary. That’s why it’s vital you consult an experienced, licensed insolvency practitioner like Irwin Insolvency.

The IP will provide a detailed quote at the outset so that all fees and costs are clear. It’s essential you have this information. It helps you determine whether this is the right path for your company. The IP charges professional fees for their service based on the size and complexity of the business.

An approximate total figure for the average members’ voluntary liquidation cost is often in the region of £4,000.00.

Irwin Insolvency – Your Trusted Partner in a Members’ Voluntary Liquidation (MVL)

Are you ready for your next project now that your business has served its purpose? Our experienced, licensed insolvency practitioners have guided companies through the process for many years.

Contact Irwin Insolvency for expert help with your MVL, or any queries about company liquidations.