SG01

Members Voluntary Liquidation

A Members Voluntary Liquidation or MVL is a process that facilitates the winding up of a solvent company and distribution of its assets to shareholders. A MVL may be used in situations where a company has sold its business and is no longer trading or required to trade.

A Liquidator can distribute pre CGT assets held by the company, tax free and shareholders can utilise other Small Business CGT concessions to minimise their tax liability. It is also an effective and independent way to resolve disputes between directors and shareholders, but more often a means to rationalise defunct corporate entities and ensure assets are distributed to shareholders in the most tax effective manner.

To initiate a MVL, the following steps are required:

  • A directors’ meeting is held at which a majority must resolve that the company is solvent and that a general meeting of members be convened to consider whether the company should be wound up.
  • A declaration of solvency must be lodged with ASIC prior to the members notice being issued. Members are generally given 21 days notice of the meeting.
  • At the members meeting, resolutions that the company be wound up and the appointment of a liquidator should be passed.
  • The Liquidator will then attend to the sale of any assets of the company, payment of creditors and then the in specie distribution of assets to the shareholders. In order to streamline the liquidation process, we often recommend that the affairs of the company are wound down prior to our appointment.