Members Voluntary Liquidation (MVLS) is a popular insolvency procedure in the UK, often used by businesses looking to wind up their operations in a controlled and efficient manner ...
The reason for this proposal is to reduce the number of 'phoenix companies' that arise from the misuse of MVLS. These are companies that are placed into liquidation only to re-emerge under a new name, often with the same directors and shareholders. This practice is a form of tax avoidance and is seen as unfair to honest businesses.
If the proposal goes ahead, it would mean that businesses would no longer be able to use MVLS to wind up their operations. Instead, they would have to use a creditors' voluntary liquidation (CVL), which is a more complex and expensive procedure. This could have significant implications for businesses looking to close down.
Many in my industry have expressed concerns about the potential scrapping of MVLS. We argue that the procedure is a legitimate way for companies to wind up their operations and distribute their assets to shareholders!
By removing this option, businesses may be forced to use more drastic and costly measures, such as bankruptcy. This could harm the economy, as well as hurt the individuals and families who rely on these businesses for employment.
Furthermore, Members Voluntary Liquidation is often used by family-owned businesses as a way to pass on assets to the next generation without incurring significant tax liabilities. Without this option, these businesses may have to pay higher taxes, making it more difficult for them to continue. This could lead to a decline in the number of family-owned businesses.
However, those in favour of scrapping MVLS argue that it is being misused and that stricter regulations are needed to prevent abuse. They also suggest that alternative procedures, such as solvent reconstructions or members' voluntary arrangements, could be used instead of MVLS. These options would still allow businesses to wind up their operations, but with tighter controls to prevent misuse.
While the proposal to scrap it has raised concerns, it is important to remember that it is still in discussion and may never come to fruition. It is also important to stay updated on alternative procedures that may be available in case Members Voluntary Liquidation is no longer an option.
If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.