5 Reasons To Consider An MVL In A Struggling Economic Climate
Typically, you hear of companies liquidating when they become insolvent. However, there are many reasons that directors may choose to liquidate their company if it is still solvent. The process for liquidating a solvent company is known as a Members Voluntary Liquidation (MVL). There are a number of benefits that come with choosing an MVL, particularly in a struggling economic climate. In light of the cost of living crisis, soaring inflation, and lingering effects of the pandemic, many businesses are choosing to close their doors as a protective measure. These are just a few of the reasons you may want to consider closing your solvent company in the current economic climate.
You’re looking To Retire Or Move Abroad Soon
One of the main reasons that directors choose an MVL is if they are retiring or moving abroad, and want to ensure the affairs of the company are wound up correctly with assets extracted in the most tax-efficient way. If you are thinking of retiring in the near future anyway, then it’s worth considering liquidating your company now, before financial burdens caused by the current environment become a serious problem for you. Liquidating your company before entering a financial crisis will enable you to close your company in a more favourable economic position than waiting and potentially risking insolvency.
You’re Concerned About The Future
In light of the current economic climate, many business owners understandably are concerned about what will happen in the near-future. With the cost of living crisis, consumer habits are changing whilst supply chain issues continue, as inflation and interest rates soar. This is causing the number of insolvencies to rise. Even for successful businesses, this is bound to cause concerns. For this reason, many businesses are choosing to be proactive in closing their doors now before their business runs into difficulty. An MVL takes the stress out of closing your company whilst providing economic benefits.
Your Business Has Run Its Course
Feel that your business has run its course? Sometimes a company may simply come to the end of its useful life or become outdated. If you feel that your business is coming to the end of the road, now is a sensible time to liquidate before you become impacted by the financial crisis. An MVL ensures the process of closing your company is smooth for shareholders, directors, creditors and employees, minimising any disruption as far as possible.
You’re Restructuring Your Company
In response to wider economic forces, many businesses may be looking at ways to restructure and streamline their processes. Restructuring may be useful if you need to raise funds, downsize or change your management system. Under Section 110 of the Insolvency Act 1986, a reorganisation through an MVL may provide the strategy for this. You may also consider an MVL if you’re de-merging or dividing a company and need to re-distribute shares or transfer assets.
You Want To Extract Assets In The Most Tax-Efficient Way
One of the main benefits of an MVL is that it provides the most tax-efficient way for extracting cash and assets when you close your company. WIth an MVL, you benefit from Business Asset Disposal Relief which enables you to extract funds at 10% tax. Ensuring that you can close your business in the most tax-efficient way possible, is particularly crucial in the current period of financial strain.
If you think that an MVL may be beneficial for your business, or you would like to hear more about your options in the current economic climate, our experienced team at My Liquidation can help. Please don’t hesitate to get in touch with us in order to discuss the different options that are available to you.
