Members' voluntary liquidation
A structured and compliant exit with a trusted partner
When a company has fulfilled its purpose or is no longer required, a members’ voluntary liquidation (MVL) offers a structured and compliant way to wind-down operations and allow the company to be deregistered. It is an effective strategy to ensure that all obligations and duties of Directors are met, assets are distributed efficiently and the risk of unknown claims coming back years later minimised.
At KordaMentha, we support directors, advisors and company secretaries through the MVL process, delivering solvent wind-downs that are completed quickly, efficiently and in accordance with the law.
Members’ voluntary liquidation
What is a members’ voluntary liquidation?
Members’ voluntary liquidation is a formal process used to wind up a solvent company that doesn’t meet the requirements for a voluntary de registration. A solvent company is one which has no liabilities or has enough assets to meet these liabilities It involves appointing a liquidator to realise assets, pay any liabilities, and distribute any surplus to shareholders. The main advantage of a MVL is mitigating the risk of unknown creditor claims later emerging.
When should a company consider MVL?
A MVL is used when directors want a structured, compliant way to deregister the company. MVLs can be used with dormant companies or companies that are still operating or have recently ceased operating, the only condition is that the company be able to pay its debts (be solvent).
As part of the MVL process the directors must certify that the business is able to pay its debts within the next 12 months. If the business is unable to pay its debts or the directors cannot provide this certification then they should consider a creditors’ voluntary liquidation or voluntary administration.
Companies often choose MVLs for reasons such as:
- Group simplification – either through passage of time or a history of acquisition corporate structures can accumulate a large number of dormant or redundant corporate entities. Deregistering these companies allows the corporate structure to be streamlined.
- Certainty – a MVL is a statutory process that involves publicly advertising the liquidation, the Corporations Act provides a statutory bar that prevents creditors from coming forward after a set date. This provides directors with certainty that claims of potentially unknown creditors have been settled.
- Assets over the threshold – directors can only apply for a voluntary deregistration where the company has less than $1,000 in assets and no liabilities. In all other cases they must use the MVL process.
- Tax efficiency – a MVL may allow for a more tax efficient exit that selling or otherwise transferring assets out of the company. If during the MVL process it becomes apparent that the company is not solvent (its liabilities are greater than its assets) then the liquidator can convert the liquidation into a creditors’ voluntary liquidation.
The MVL process
Below is a high-level outline of the MVL process:
- Payment of all liabilities, lodgement of tax returns and other statutory returns. This step can be completed by the liquidator but can often be more cost effective if completed by the company.
- Directors sign a declaration of solvency, consent to act obtained from liquidator and meeting of members held to resolve to place company into liquidation.
- Liquidator is appointed and advises ASIC, ATO and other relevant statutory authorities and publishes a public notice advising of appointment.
- Liquidator commences dividend process by writing to any known creditors as well as publishing a public notice. The dividend process provides a statutory bar for any further claims being made against the company.
- Liquidator pays and creditors or tax liabilities or collects any tax refunds.
- Liquidator determines whether assets are to be distributed in cash or in specie (by distribution of the assets themselves) and calculates and pays a distribution to members of the company. Distributions to members can be capital or franked dividends as appropriate.
- Liquidator lodges final statements with ASIC which triggers the deregistration process. Three months after lodgement of final return the company will be deregistered.
How we help
With deep experience in solvent wind-downs, and a team that has proven expertise across different industries we are trusted partners for companies and legal advisors. Our capacity to act independently as liquidators and advisors ensure that MVLs for our clients are executed efficiently and in full compliance with statutory requirements.
Why choose us?
- Independent and trusted advisors: We provide objective advice and act without conflicts, ensuring decisions are made in the best interests of stakeholders.
- Confidence and experience navigating complexity: Our team has extensive local and regional experience managing MVLs across a wide range of industries and delivering complex group simplifications.
- End-to-end capability: From initial planning to final distributions and deregistration we have capability to manage and provide support at every stage of the administration.
Speak to our expert team to learn how we can support your organisation or client in a Members’ Voluntary Liquidation.
Who we help
MVL often involves multiple stakeholders, each with different priorities.
We work closely with:
Companies and directors
We assist directors in planning and executing solvent wind-downs that meet the statutory requirements and ensure their obligations as directors are met. Our team ensures that this process is efficient and transparent from start to finish.
Learn more about our work with companies
Company secretaries & legal advisors
We support company secretaries and external legal advisors in managing all the governance obligations and statutory requirements to place a company into MVL and all statutory lodgements required during the liquidation. We are also able to assist on planning for a members voluntary liquidation to ensure that it can be completed as quickly and cost effectively as possible.
Learn more about our services for company secretaries & legal advisors.
