Members Voluntary Liquidations

When a company has completed its purpose, or the directors of a company decide to retire, a Tax efficient way of releasing the surplus which may have accumulated is to place the company into a Members Voluntary Liquidation.

The Tax advantage for shareholders is that a capital gain received on their shares will only be taxed at 33%, whereas if the surplus monies were taken out as salary, then these monies may be taxed at a much higher marginal tax rate.

To place a company into a Members Voluntary Liquidation, the directors must follow a Summary Approval Procedure as set out in the 2014 Companies Act.  The directors must complete a Declaration. The Declaration summarises the company’s assets and liabilities and the directors state that the company will be able to pay all of its debts in full within 12 months of the commencement of the Liquidation. There may be serious consequences for the directors if they swear a Declaration  which is inaccurate.

The Declaration must be:

  • Made in writing
  • By all or a majority of directors
  • At a meeting held not earlier than 30 days before the shareholders meeting
  • State the amount of current assets and liabilities
  • That the company will be able to pay its debts in full within 12 months of commencement of winding up
  • Accompanied by an auditors report stating that the declaration is not unreasonable
  • Appended to shareholders notice/resolution
  • Delivered to CRO within 14 days

Once the Declaration is completed, a copy of it must be sent to all shareholders, together with a formal notice of the shareholders meeting. At the shareholders meeting, a special resolution must be passed i.e. 75% of the shareholders voting must vote in favour of the resolution.

A popular way to distribute certain assets to shareholders is to distribute them in specie i.e. in kind. Thus, freehold property may be transferred to shareholders directly. A significant advantage of in specie distributions is that no stamp duty is payable.

Benefits of a Members Voluntary Liquidation

  • Savings on ongoing audit and accounting costs
  • Savings in management time previously taken up with the preparation of financial information and tax returns
  • Reducing risk to the company and its directors by avoiding “corporate memory loss“. This can happen when a company is being inactively maintained
  • Often used as part of a corporate simplification process where a group wants to streamline its corporate structure
  • Can be a very tax efficient method of distributing cash/ assets to shareholders
  • Averts the danger of an inactive company being involuntarily struck off which can result in the loss of a company’s limited liability protection.

Liquidations of Irish Collective Asset Management Vehicles

In the past 10 years, a tsunami of regulations have been released, such as Undertakings for Collective Investment in Transferable Securities (UCITS IV/V), Alternative Investment Fund Managers Directive (AIFMD), Markets in Financial Instruments Directive (MiFID II), European Union Securities Financing Transactions Regulation (SFTR) in Europe and Dodd Frank and the Foreign Account Tax Compliance Act (FATCA) in the US. We are experts in guiding fund managers through the web of legislation and regulations in order to wind up a fund.

The Irish Collective Asset Management Vehicle is governed by a simplified legislative regime under the Irish Collective Asset Management Vehicles Act 2015 and is distinct from the Irish Companies Act 2014. With the exception of the liquidation of an Irish Collective Asset Management Vehicle, the ICAV structure is not subject to Irish company law and accounting rules which apply to Irish Collective Investment Schemes (CIS) structured as a Public Limited Company (PLC). The authorisation and supervision of the ICAV IS carried out by the Central Bank. The liquidation procedures for ICAVs are straightforward, with similar Statutory forms being used as for Irish companies. The Companies Registration Office has no role in accepting filings made by Irish Collective Asset Management Vehicles: All filings are made with the Central Bank.

Given the benefits of Irish Collective Asset Management Vehicles, it is expected that such vehicles will dominate the fund management sector in Ireland.

The procedures to liquidate an Irish Collective Asset Management Vehicle is similar to that of a company incorporated under the Companies Act 2014.   An Irish Collective Asset Management Vehicles is a corporate vehicle specifically developed for investment funds and is regulated by the Central Bank of Ireland. Like an investment company, an Irish Collective Asset Management Vehicle is a corporate entity that is governed by a board of directors and owned by its shareholders..

As authors of “The Practitioners’ Guide to Members Voluntary Liquidations“, we specialise in the area of Members Voluntary Liquidations, and we have streamlined procedures in place to expedite the completion of Members Voluntary Liquidations.

We provide free estimates/quotations for carrying out Members Voluntary Liquidations.

We are able to prepare all of the necessary documents for a MVL within 24 hours.

As registered auditors we can also provide the “Report of the Independent Person” that is required under Section 208 of the Companies Act 2014.

For further information please contact Jim Stafford or Tom Murray on 01 661 4066

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