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Why use a members’ voluntary winding up?

If a company’s owners wish to cease to trade and cannot sell the company it may be possible to undertake a members’ voluntary liquidation (MVL) in order to extract the profit from the company as long as the company remains solvent after meeting any cessation costs. This could allow the company owners to control the process of winding up the business and thereby maximise any possible tax reliefs as described below.

Owner managers can wind up their company through an MVL by passing a special resolution and swearing a statutory declaration of solvency (see below). A MVL requires a licensed insolvency practitioner to act as liquidator who will realise the assets, pay off all liabilities, and return the surplus to the shareholders. This may be an expensive process but, where the company has significant reserves, a MVL will normally be the preferred route for tax purposes. However, some liquidators are now prepared to offer competitive rates, particularly where the company's balance sheet is mainly cash.

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