Members’ Voluntary Liquidation
A Members’ Voluntary Liquidation (MVL) is a formal process initiated voluntarily by the shareholders to wind up a company that is able to pay all of its debts within 12 months from the commencement of the liquidation.
Before the liquidation begins, the directors must assess the company’s financial position and make a declaration that the company will be able to pay its debts in full within 12 months after the liquidation begins.
The shareholders then resolve to place the company into liquidation and appoint a liquidator through Extraordinary General Meeting.
The liquidator is responsible for winding up the company’s affairs, dealing with its remaining assets and liabilities, distributing any surplus to shareholders according to their respective rights and interests, and completing the process through to dissolution.
When might an MVL be appropriate?
Business has ceased or is planning to cease operations
A business or joint-venture may have reached the end of its operations or completed the project or venture for which it was established, and its shareholders have decided to formally close the company.
A corporate group simplifying its structure
A group may have subsidiaries that are dormant, redundant or no longer required following regulatory changes or group restructuring.
Alternative to strike-off
A company has substantially wound down its operations with few or no remaining employees, but still has residual assets and liabilities. Where the company does not meet the requirements for strike-off, an MVL can serve as an alternative to close the company.
An end-to-end MVL service
Oakbridge provides an end-to-end MVL service, from preparing the company for liquidation through to dissolution. We guide you through each stage and the steps required along the way.
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Before the MVL begins, we work with you to understand the company’s position, identify the matters that should be addressed in preparation for liquidation and provide guidance on winding down its remaining assets and liabilities.
This may include matters relating to setting aside sufficient funds for liquidation expenses and remaining tax liabilities, termination of accounts/ subscriptions, settlement of intercompany balances and other matters relevant to preparing the company for a straightforward liquidation.
Where the company requires substantial work to implement a broader business wind-down, a separate Solvent Wind-down Advisory engagement may be appropriate.
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Once the company is ready to commence liquidation, we agree the liquidation timeline, prepare the necessary liquidation documentation and guide the directors and shareholders through the required steps.
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Following the commencement of liquidation, the liquidator will administer the liquidation and deal with the company’s remaining affairs, including remaining assets and liabilities, statutory and regulatory requirements, corporate income tax matters with the assistance of the company’s tax agent, and distributions to shareholders.
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Once the company’s affairs have been fully dealt with, the liquidator completes the final liquidation procedures (including the calling of Final General Meeting and distribution to the company’s shareholders) and brings the company through to dissolution.
Frequently Asked Questions
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Strike-off may be suitable where a company has stopped trading or never started business and meets ACRA’s striking-off criteria. Among other requirements, the company must have no outstanding liabilities, no unresolved issues with government agencies, no outstanding loans and charges in the register of charges and no ongoing or pending legal proceedings. It must also own nothing and owe nothing at the time of application.
If the company is unable to meet the strike-off criteria but is solvent, an MVL provides an alternative route to closing the company.
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The preparation required will depend on the company’s circumstances. We generally recommend substantially dealing with the majority of the company’s assets and liabilities before the MVL commences, leaving a relatively simple balance sheet and sufficient cash for the amounts that still need to be paid or provided for up to the conclusion of the liquidation.
This helps keep the liquidation focused and efficient. Significant matters remaining after appointment can extend the liquidation and result in additional professional fees and other costs associated with the extended liquidation and ongoing statutory requirements.
The preparation process may also involve the company to terminate its remaining contracts, de-register its accounts and subscriptions, etc.
Once the company is substantially ready for liquidation and the necessary information has been provided, we generally recommend allowing around 3 weeks before the intended commencement date to prepare the statutory documentation and coordinate the steps required to commence the MVL.
Where circumstances permit and the necessary requirements can be completed within a shorter timeframe, an earlier commencement may be possible.
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For a straightforward MVL where the company’s affairs have largely been dealt with before the liquidator’s appointment, the process will typically take around 6 to 12 months from commencement through to completion of liquidation.
The actual timeline depends on the circumstances of each company. Outstanding corporate tax matters, remaining assets or liabilities, distributions to shareholders and other matters that need to be resolved can affect how long the liquidation takes.
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Once the liquidator is appointed, the directors’ powers cease, except to the extent that is approved by the liquidator.
The directors may still be asked to assist in providing information, records, explanations or other assistance where necessary during the liquidation. For example, if IRAS raises queries relating to transactions that occurred before the liquidation, the directors may need to assist in providing information or explanations about those transactions, as the liquidator may not have first-hand knowledge of the company’s historical affairs.
Any ongoing involvement from the directors will therefore depend on the matters that arise during the liquidation.
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Once the MVL begins, the liquidator takes control of the company’s remaining cash and administers receipts and payments as part of the liquidation. We will guide the company on the banking arrangements required.
Payments made during the liquidation will be communicated to shareholders as appropriate. Where a payment relates to an obligation that was not previously identified or provided for by the Company, we will raise the matter with the shareholders before proceeding.
Any remaining surplus will ultimately be available for distribution to shareholders in accordance with their respective rights and interests.
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The remaining surplus will ordinarily be distributed to shareholders pursuant to the company’s Constitution once the company’s outstanding matters have been sufficiently resolved (including finalisation of the company’s tax position) and the amount available for distribution can be determined.
If shareholders wish to receive an interim distribution before the company’s tax position is finalised, this can be considered separately. Appropriate provision must first be made for the full amount of tax payable by the company. A tax adviser may need to be engaged to quantify the company’s total tax liability that should be provided for, including tax liabilities relating to outstanding and open Years of Assessment.
An interim distribution involves additional work and, where requested, will be separately scoped and quoted before the work is undertaken.
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The company, with the assistance of its tax agent, will need to prepare and/or submit the relevant tax returns, tax computations, financial statements and supporting information for all outstanding Years of Assessment up to the date of liquidation. Upon commencement of the liquidation, the liquidator will file the requisite information with IRAS in accordance with its requirements.
During the liquidation, the liquidator will submit the requisite Declarations of Receipts and Payments to IRAS. If IRAS raises queries relating to Years of Assessment or transactions from before the liquidator’s appointment, assistance from the directors and the company’s tax agent may be required to provide the relevant information, records or explanations.
Outstanding corporate income tax matters will need to be resolved and tax position must be finalised before the liquidation can be completed.
Still have questions?
If you would like to understand the Members’ Voluntary Liquidation service or discuss your circumstances before proceeding, we can arrange a short introductory call.