Members Voluntary Liquidation (MVL) vs Deregistration

One of the key advantages of MVLs is that it provides a higher level of assurance that the company will not be reinstated, which can be important for companies exposed to higher levels of risk. Katelyn Stokes I Manager I Newcastle Business Recovery and Insolvency 

As a business recovery and insolvency service provider, we understand that winding down a solvent company can be a complex process. One option to consider is Members Voluntary Liquidation (MVL), which provides a tax-effective way for shareholders to access the stored value of the company when it no longer has a commercial use.

Benefits of an MVL

Compared to deregistration, a MVL may be a more suitable option for companies that do not meet the legal requirements for voluntary deregistration, or for those where voluntary deregistration may not be the best choice. One of the key advantages of MVLs is that it provides a higher level of assurance that the company will not be reinstated, which can be important for companies exposed to higher levels of risk, such as public liability or workers’ compensation claims that may arise in the future.

Another benefit of MVL is that it may allow access to stamp duty roll-over relief, and the tax outcome of the final distribution to shareholders is often more favourable compared to other options. Shareholders may be able to benefit from Capital Gains Tax (CGT) concessions, such as if the shares were acquired prior to 20 September 1985, in which case no tax would be payable for that part of the Liquidator’s distribution (pre-CGT). Alternatively, if the shares were acquired after 20 September 1985, shareholders may be able to access either the general 50% CGT discount or small business CGT concessions.

While the initial costs of MVL may be higher compared to voluntary deregistration, the potential taxation benefits to shareholders are likely to exceed the costs of a MVL, especially if the Liquidator’s distribution includes capital proceeds that would have otherwise been distributed as a dividend. Additionally, shareholders may be able to claim a deduction for the expenses of winding up over a period of five income years, as per Section 40-880 of the Income Tax Assessment Act 1997.

However, it is important to note that the effectiveness of a MVL often depends on proper planning and preparation before the appointment of a Liquidator. It is rare for a company to be ready for MVL without a thorough review of its affairs. There may be certain transactions that are more beneficial to take place prior to the appointment of the Liquidator, such as the application of all available Small Business CGT concessions and payment of any concessionally taxed liabilities.

Our team of experienced professionals can assist you throughout the MVL process, from the initial planning and preparation to the final distribution to shareholders. We can help you consider all the available options, assess the tax implications, and guide you through the legal requirements and obligations associated with a MVL. Our goal is to help you make an informed decision that will result in the most favourable outcome for your company and shareholders.

A MVL can be a beneficial alternative to deregistration for solvent companies that are no longer required. It provides a tax-effective way for shareholders to access the stored value of the company and offers advantages such as higher assurance against reinstatement, potential access to CGT concessions, and preservation of company assets whilst the Company’s affairs are finalised. However, proper planning and preparation are essential for a successful MVL process, and our team is here to provide expert guidance and support every step of the way. Contact us today to learn more about our Members Voluntary Liquidation services and how we can help you navigate through the process.If you are considering winding up a solvent company, consider MVL as a viable option and let our experienced team assist you in achieving the best possible outcome. Choose us for a seamless and efficient MVL process.

Contact our Business Recovery and Insolvency team today to learn more about our services and how we can assist you in the MVL process. Choose us for a professional and reliable service that puts your company’s best interests first.