Here is a summary of the various stages of an MVL that might be of interest to certain clients:
Initial Advice meeting – same day
This can take place on the same day as any initial inquiry or meeting and can take place online or over a conference call. All board members should attend as an insolvency practitioner will go through the detail of the process and implications of entering into an MVL.
If they choose to proceed then the Terms of Business will be sent across for them to review and sign.
Finalising company affairs – one to 14 days to complete
Directors should now begin to finalise the company’s affairs before formally beginning the MVL process. This includes:
- Raising any final invoices
- Selling any tangible company assets that are not to be transferred in specie
- Paying any outstanding creditors
- Deregistering for VAT and PAYE and submitting any final returns
- Prepare draft final accounts and corporation tax returns – final accounts and returns must be up-to-date on date of liquidation
- Pay the estimated corporation tax balance
Instruction and the declaration of solvency – one to three days to complete
Once the company’s affairs have been finalised, the terms formally instructing the insolvency practitioners to liquidate the company should be agreed and the fee element paid.
There will be further costs required to pay third parties within the MVL but these will only be paid once the business has entered the MVL. The declaration of solvency must be prepared at this point, setting out all remaining assets and liabilities and confirming that all debts can and will be paid within 12 months of the date of liquidation.
This must be a sworn statement to a solicitor by all directors or if there are three or more, than by the majority.
As this is a sworn statement, making any false declarations here would be regarded as a criminal offence.
Shareholders and directors meeting – same day to 21 days
Depending on the number of shareholders, the meeting to place the company into an MVL could be held virtually straight away. The threshold is usually 90% of shareholders actively engaged in the process. Otherwise, between 14 and 21 days notice must be given depending on the age of the company.
Once the meeting is completed the company can be placed into liquidation.
Post liquidation and distribution – three days to six months
Once the company is formally in an MVL, any remaining assets can be realised and distributed firstly to any remaining creditors and then to members.
If members provide an indemnity, an early distribution can be made while creditor claims are finalised. However this is sometimes less practical where there is a significant number of shareholders.
Once all other outstanding issues have been dealt with and confirmation provided that pre-appointment HMRC returns and payments have been made, the case can be closed and the company officially dissolved three months afterwards.