Members Voluntary Liquidation is a liquidation in which the company is solvent and the company’s assets are distributed to its members (i.e. shareholders).
For information on Turnaround, Schemes of Arrangement, Receivership, Examinership or Creditors Voluntary Liquidation please click on the following links:
A Members Voluntary Liquidation can provide significant tax advantages . A capital gain received on proceeds will only be taxed at 33%. If the surplus monies were taken out as salary, then those monies may be taxed at a much higher marginal tax rate. The CGT rate is nil (subject to limits) in respect of Early Retirement Relief.
A Members Voluntary Liquidation can be a pragmatic way to resolve a shareholders’ dispute.
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 on a form E1-SAP. The Declaration summarises the company’s assets and liabilities. 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 Members Voluntary 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. At the shareholders meeting, a special resolution must be passed i.e. 75% of the shareholders voting must vote in favour of the resolution placing the company into a Members voluntary Liquidation.
Once the shareholders pass the resolution placing the company into liquidation the liquidator will advertise his/her appointment in Iris Oifigiuil.
A popular way to distribute certain assets to shareholders in a members voluntary liquidation 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.
A major difference from a Members Voluntary Liquidation to a Creditors Voluntary Liquidation is that a MVL Liquidator does not have to submit a report to the CEA
Between the date of the decision to liquidate and the appointment of the Liquidator, the Directors should undertake the following steps.
The best value way to carry out a members voluntary liquidation of a company is to realise all assets, pay all creditors and just hand over a bank account with the remaining monies to the liquidator.
We set out below some of the steps/issues that directors should consider in realising all assets to cash etc.
The position of the employees needs to be carefully considered. If there is a Trade Union involved then it should be consulted. With the Covid Emergency we are now assisting Companies to hold Zoom calls to advise employees on their employee entitlements. For further information on employee entitlements please click on the following link: employee entitlements.
The employees redundancy entitlements may be calculated using the online redundancy calculator at the Department of Employment Affairs and Social Protection.
Any staff mobile phones should be cancelled on the day they leave to avoid recurring rental and phone charges. Keys to the Company’s premises should also be collected and alarm codes changed. Employees should be allowed to collect personal possessions from their desks and lockers.
All property leases should be carefully reviewed to check for dilapidation clauses etc.
The Company Pension Plan should be wound up before the Company is placed into a Members Voluntary Liquidation.
All assets of the Company should be sold. If selling IT equipment all data should be backed up first before the data on the equipment is erased.
VAT and PAYE returns should be brought up to date. The last pre-liquidation Corporation Tax return is generally submitted shortly after the Company is placed into a Members Voluntary Liquidation.
We can also assist with the valuation and sale of subsidiaries and other assets.
We can also assist in developing strategies in maximising realisations from debtors. For further information on our Credit Management consultancy services please check out our sister web site www.creditmanagement.ie