At Levi Consulting we support company secretaries, accounting firms, law firms and directors through the members’ voluntary liquidation (MVL) process delivering a pre-appointment review and then a formal liquidation of a solvent company.
Our referrers for MVLs are accounting firms, law firms and company secretaries. We have completed over 300 MVLs. On each, David Levi has performed a pre-appointment review and recommendations to ensure no unexpected issues arise. As subject matter experts in MVL, we can identify issues up-front and easily, with solutions.
What is a members’ voluntary liquidation?
MVL is a formal process used to wind up a solvent company. It involves appointing a liquidator to realise assets, pay any liabilities, and distribute surplus assets to shareholders and thereafter deregistration by ASIC. Suitable for dormant companies or companies that have recently ceased operating. The only condition is that the company is solvent – able to pay its debts within 12-months.
MVL is often chosen for reasons such as:
- Group simplification to enable the number of redundant companies in a group to be reduced to save forward compliance and secretarial costs.
- Tax efficiency. A MVL may allow a more tax efficient exit than selling or otherwise transferring assets.
- Distribution of surplus assets. A MVL achieves distribution of surplus assets to shareholders (cash, property, directors’ loans, shares) to shareholders in a tax efficient manner either in cash or in-kind (in-specie).
Why pre-appointment planning
Perhaps what distinguishes our success in MVLs is that we perform pre-appointment planning with the referrer. It typically takes less than an hour to perform. Where requested we will document up-front. Our planning includes:
- Review company’s structure (directors, shareholders, classes of shares and rights on distribution of surplus assets).
- Review current financial position (consider assets, liabilities, nature of assets and liabilities, liquid, non-liquid, consider composition of issued capital, consider the composition and nature of capital reserves, revenue reserves, franking credits).
- Review tax status (last income tax return, final income tax return, tax compliance issues). Existing accountant or tax agent to lodge all returns.
- Forecast the expected position during liquidation through to the final liquidator’s distribution including draft of final distribution to allow accountants to pre-determine characterisation of distribution for tax purposes by shareholders.
And there is more that we can and often perform at cost.
- Conduct PPSR searches, conduct historical ASIC searches, and confirm any outstanding ATO matters with the tax agent.
- Check for any intellectual property or other commercial issues that should be considered before appointment.
High level outline
- All pre-appointment planning issues are resolved. The proposed liquidator consents to act in writing. We draft all necessary notices, minutes and resolutions to achieve appointment.
- Directors’ meeting by circulation. The directors resolve that a members’ meeting be held for the purpose of a special resolution that the company enters into MVL. Directors to sign a Declaration of Solvency (Companies Form 520) confirming that all debts will be paid within 12 months. Appointment occurs at members’ meeting.
- Members (shareholders) meeting by circulation. The members pass a special resolution to liquidate the company via members’ voluntary liquidation and appoint the liquidator. The members’ meeting is often at short-notice by consent of all shareholders.
- The liquidator takes control of the company’s affairs, complies with statutory requirements – advises ATO, ASIC, other relevant statutory authorities including statutory advertising on ASIC Public Notices Website (PNW) to call for creditors’ claims and advertise notification of a proposed final distribution (Corporations Regulations 5.6.48, 5.6.65), obtains tax clearances, and distributes surplus assets to shareholders. Liquidator (in conjunction with referrer) determines whether assets are to be distributed in cash or in specie (by distribution of the assets themselves, like receivables, or in cash) and calculates and conducts the distribution to members. Distributions to members can be capital, revenue or franked dividends as appropriate.
- When all matters are finalised, the liquidator lodges Companies Form 5603 with ASIC and ASIC proceeds with deregistration.
How we help
With deep experience in solvent wind-downs we are trusted partners. We have been in the Australian market performing MVLs (and also, other forms of reconstruction and insolvency) supporting company secretaries, accounting firms, law firms and directors for more than 30 years. Our News and Insights tab on our website provides an overview of our results.
Why choose us
We are independent and trusted. We have extensive experience managing members’ voluntary liquidations across a wide range of industries and where required, delivering complex group simplifications. We provide end-to-end capability. From pre-appointment planning to final distributions and deregistration we have capability and track-record to provide support to company secretary, accountants and lawyers and complete members’ voluntary liquidations quickly. The delay is often the tax clearances. We press the ATO to expedite.
Questions and answers
Q: Can we just deregister instead of MVL?
Deregistration is suitable if there are no assets or liabilities. If the company has revenue reserves (retained earnings), franking credits or capital reserves, or the company wants to benefit from the process to advertise for claims and obtaining a tax clearance then a MVL is often safer and can be tax effective.
Q: What if we sign a Declaration of Solvency and later discover debts?
Our pre-appointment review is designed to identify and resolve these risks before the liquidator is appointed.
Q: Is an MVL expensive?
Costs vary with complexity but are usually modest compared to the tax savings and finality it provides. Typically, we offer a fixed fee for pre-appointment planning and a separate fixed fee for the liquidation itself.
Q: Can we perform multiple members’ voluntary liquidations at once?
Yes. Many group restructures involve multiple companies to simplify group structures and reduce ongoing compliance costs, or we perform in tranches.
Q: Should we use an online service for members’ voluntary liquidations?
You can. However, a tailored service is not that more expensive and it reduces risk and surprise. It has been rare for us to have a surprise or to have an issue with the characterisation of the distribution. In a recent matter, for example, there was a court action by a former employee of a company and we were required by the court to keep the members’ voluntary liquidation open. It was not foreseeable, and it was a rare occurrence. Our pre-appointment planning process reduces risk and surprise.
Case studies
Family Investment Company
A long-established family company holds cash or other assets after selling a commercial property, farm or share portfolio. A members’ voluntary liquidation is used to finalise tax obligations, obtain tax clearances and distribute funds to family members tax effectively — especially for pre-CGT capital reserves.
Group Simplification
A holding company domiciled in Australia, Singapore, Hong Kong, Indonesia or otherwise in Asia with dormant subsidiaries uses the members’ voluntary liquidation process to wind up dormant companies and reduce compliance costs.
It is common that the members’ voluntary liquidation process is used by Asian domiciled holding companies to exit Australian subsidiaries.
Company secretaries, accounting firms and law firms
We regularly support company secretaries, accounting firms and law firms.
Contact David Levi today for a confidential discussion on 0418 602 466
This guide is not a substitute for advice.
Liability is limited by a scheme approved under Professional Standards Legislation.
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