At APL Insolvency we specialize in helping business owners deal with a range of matters involving their company.
We seek to find solutions to assist company directors and our goal is to help directors take a proactive approach that provides the best outcome for all stakeholders.
If a company's directors wish to close their company and distribute the company's assets to shareholders, a members' voluntary liquidation should be considered.
Whatever circumstances your company may be in, the team at APL is here to help company directors understand the options that may be available to them.
One of the options for finalising a company's affairs and distributing its assets to shareholders is a Members’ Voluntary Liquidation (MVL). Here is some information about the members' voluntary winding up process to help you understand when a MVL might be the best choice.
Despite the name, a MVL is a voluntary liquidation of a solvent company.
The company’s directors and shareholders resolve to appoint a liquidator to finalise the company's affairs and distribute the company's assets to its shareholders.
The liquidator’s role in a MVL is to distribute assets to the shareholders in proportion to their shareholdings (or otherwise as directed by the shareholders) after confirming that the company has no liabilities.
As a MVL is the winding up of a solvent company, there are no creditors to notify and there is no requirement for the liquidator to conduct an investigation into the company and report to the Australian Securities and Investments Commission (ASIC).
Accordingly, the costs involved in a MVL are usually much less than for an insolvency appointment such as a creditors' voluntary liquidation or voluntary administration.
Similarly to other types of appointment, a liquidator in a MVL takes control of the company and its assets after his appointment.
However, it is often the case that a company has ceased trading and has disposed of most of its physical assets by the time a liquidator is appointed.
Regardless, the liquidator will realise any company assets and take possession of any company funds in order to make a distribution to shareholders.
Prior to making any distribution however, the liquidator must obtain tax clearance from the Australian Taxation Office (ATO).
Tax clearance is obtained by seeking confirmation from the ATO that all of the company's taxation returns have been lodsged as required and that all company tax liabilities have been paid.
If there are any outstanding tax lodgements, the ATO will not provide tax clearance and the directors will need to ensure those mattters are addressed. The liquidator is unable to proceed with a distribution to shareholders until tax clearance has been obtained.
Following receipt of tax clearance from the ATO, and provided he is satisfied there are no unpaid company liabilities, the liquidator then able to distribute the company's assets to its shareholders and then finalise the liquidation.
When a company's shareholders wish to close their company, they have the option of simply deregistering the company.
Deregistering a company is a simple and cheap way to bring a company to an end.
However, a company may only be voluntarily deregistered by an application to ASIC subject to meeting certain criteria.
ASIC will only accept an application for voluntary deregistration of a company if:
- all members of the company agree to deregister; and
- the company is not conducting business; and
- the company's assets are worth less than $1000; and
- the company has no outstanding liabilities including unpaid employee entitlements; and
- the company is not involved in any legal proceedings; and
- all outstanding ASIC fees and penalties have been paid.
A MVL can also provide advantages from a tax perspective in certain circumstances, particularly when pre-CGT assets are involved.
Directors should consult with their accountant or taxation advisor regarding those matters prior to approaching a liquidator in relation to a MVL as liquidators are not able to provide taxation advice to directors.
The costs of a MVL vary depending on a company's circumstances and the amount of work likely to be involved. More complex mattes are likely to have a higher cost as liquidator’s fees are generally charged at hourly rates based on time spent on the liquidation.
However, as opposed to the liquidation of a solvent company, the lliquidator is not required to conduct an investigation into the company's affairs, send reports to creditors or perform may of the other time consuming tasks often involved in a liquidation.
Accordingly, the cost of a MVL is usually significantly less than for a creditors' voluntary liquidation (CVL).
At APL Insolvency, we discuss your situation to determine how much work is involved to estimate the fee before commencing any matter. In general, directors may pay an upfront fee that ranges from $4k to $5k for a simple MVL with a higher fee required for more complicated situations when more work is involved.
APL Insolvency has over 20+ years of experience in dealing with MVLs as well as all forms of corporate insolvency.
If you are interested in learning more about the MVL process and whether a MVL is appropriate for your company, contact APL Insolvency today to arrange a free, no-obligation options assessment consultation.