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A quick guide to Members' Voluntary Liquidations

Nov 02, 2018

By Sarah-Jane O'Keeffe

With the 2019 budget recently announced, and the income tax deadline fast approaching, clients (or yourself) may be considering retiring from the company they started many years ago and asking themselves how they do it.

There are a number of ways to effectively wind down a business that can be done in a tax-efficient manner. One of these is through the process of a Members' Voluntary Liquidation (MVL). This process, compared to the Creditors' Voluntary Liquidation, is for solvent companies. The MVL process can take between four to twelve months to file the final paperwork at the Companies Registration Office (CRO), depending on the complexity of the case.

The process can be mildly complicated for clients, so there are a few things you should advise them to do:

  • They should have a meeting with the directors and shareholders to pass a resolution to place the company into liquidation and appoint a liquidator;
  • The value of the assets and liabilities for the company must be brought up to within three months of the date of liquidation;
  • A form, known as an E1-SAP (Declaration of Solvency), needs to be approved at the meeting of the directors and will summarise the assets and liabilities. This must be accompanied by an independent accountant’s report confirming the company’s assets and liabilities, and the opinion of the directors of the company that the company will be able to pay its debts in full;
  • The nominated liquidator will issue the directors with a letter of consent to act;
  • Once appointed, the liquidator will file the E1-SAP, shareholder resolution and notice of his/her appointment with the CRO;
  • The liquidator will then take control of the assets of the company and write to all parties affected by the liquidation;
  • The liquidator will ensure that all tax returns are brought up to the date of liquidation;
  • Once confirmation that all returns are in order and clearance is issued from the Revenue Commissioners, distribution can be made to the shareholders;
  • A final meeting is then called and the final returns are made to the CRO;
  • Finally, independent tax advice by the shareholder on the distribution received is highly recommended.

If the company is not being passed to the next generation, the MVL process is the simplest way to extract value from the company’s assets you have been accumulating for some years.

Sarah-Jane O'Keeffe is a Manager in Corporate Recovery at Baker Tilly Hughes Blake.