A Members Voluntary Liquidation is used when a company is solvent and the shareholders wish to conclude the company’s corporate life and withdraw the assets in a tax-efficient manner.
An MVL can apply to a single company or one that is part of a group of companies. Where group structures are involved the tax relationship between group companies requires careful consideration before action is taken, as does the potential impact of the substantial shareholder exemption relief.
It is quite common for a company to use the restructuring provisions of the Insolvency Act 1986 to split activities from one company into two or three economic units, with the MVL process being particularly useful in terms of containing any immediate tax charge on either the company or the shareholders.
An MVL can take many years to conclude because of the type of asset held but the liquidator is always keen to distribute monies to shareholders as early as possible in order that the cash can be utilised elsewhere.
The various tax issues surrounding an MVL necessitate advance planning and thought such that the most tax-efficient result is achieved.
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