Members Voluntary Liquidation Procedure (MVL)

An Outline of the MVL Procedure

A Members’ Voluntary Liquidation (‘MVL’) must follow the procedure set out in insolvency legislation. We will assist you with the preparation and administration of each stage, including the drafting of requisite notices, minutes and other documents, where appropriate, but ultimately the responsibility remains with the director(s) of the Company. The following main steps must take place in each appointment:

Board meeting: A quorate meeting of the Board of Directors will have to approve the issue of notices convening the members’ meeting required by statute to place the Company into MVL, nominate someone to act as chairman at the meeting of Members and state which Director(s) are to swear a Declaration of Solvency on behalf of the Company.

Notices: Notices have to be issued convening a meeting of Members to pass resolutions to wind up the Company voluntarily, appoint a Liquidator, set the basis of the Liquidator’s remuneration, and any other resolution necessary in the circumstances of the Company for the administration of the liquidation, such as granting the Liquidator the power to distribute assets in specie to the Members.

Declaration of Solvency: The Director(s) nominated by the meeting (which must be all of them if there is only one or two Directors, or a majority if there are three or more Directors) will be required to swear a Declaration of Solvency on behalf of the Company confirming that the Company will be able to pay its debts in full, including interest, within no more than 12 months of the commencement of the liquidation. We will assist you in preparing a Declaration of Solvency from the information that you provide, but it remains your statement. In the event that it transpires that the Company is in fact insolvent and it is placed into creditors’ voluntary liquidation by the Liquidator, it is presumed that the Declaration of Solvency was not made on reasonable grounds, which leaves the Director(s) who swore it liable to a fine and/or imprisonment.

Members’ meeting: A meeting will be convened at which Members will be required to pass resolutions placing the Company into voluntary liquidation, appointing a Liquidator, approving the basis of the Liquidator’s remuneration, and any other resolution necessary in the circumstances of the Company for the administration of the liquidation, such as granting the Liquidator the power to distribute assets in specie to the Members.

Post-appointment notices: After the meetings, the Liquidator is required to issue and advertise in the London Gazette a variety of notices for the attention of the Registrar of Companies and the creditors of the Company.

Realisation and distribution of assets: The Liquidator will realise and then distribute assets in accordance with the statutory order of priority. Creditors, together with an amount for statutory interest from the date of the commencement of the liquidation, or the date the debt fell due for payment if a later date, rank in priority to Members. In order to enable us to make an early distribution to the Members it is our standard practice to obtain indemnities from the Members in MVLs in respect of any liability that may fall on the Liquidator as a result of making a distribution.

Tax affairs: The Liquidator will need to obtain clearance from HM Revenue & Customs about the Company’s corporation tax affairs before the liquidation can be finalised and completed. The Liquidator will not be able to obtain such clearance until final accounts have been prepared for the Company to the date of the liquidation. If such accounts have not been prepared prior to the liquidation then the Liquidator may complete the accounts and charge for doing so in addition to the agreed remuneration for acting as Liquidator, or alternatively instruct the Company’s accountants to prepare them. The Liquidator’s or accountants’ reasonable costs of preparing the accounts and finalising the Company’s corporation tax liability will be payable as an expense of the liquidation.

HM Revenue and Customs consider that they are entitled to statutory interest at 8% per annum on any pre-liquidation taxes that are outstanding as at the date of the winding up resolution putting the Company in to liquidation, even if they do not yet fall due for payment, i.e. they are future debts. As a result, whenever possible, all pre-liquidation taxes should be paid in full prior to the commencement of the liquidation. If the Company cannot submit and pay a return immediately before the winding-up resolution, the directors should obtain their own tax advice on estimating the amount likely to be due in respect of the final pre-liquidation return and paying over an equivalent amount to HM Revenue and Customs before the return is finally calculated and submitted. Cromwell & Co accepts no liability should HM Revenue and Customs seek interest on the full return, despite any advance payment.