How much does a members' voluntary liquidation cost ?  Is it worth it ?

This depends on the extent of work required to deal with the liquidation.  If the directors have done all the preliminary work required before the liquidation, and the main thing to be done is to pass the funds to the shareholders, then a solvent liquidation can be undertaken for a fee as low as £2,000 + disbursements.  Disbursements would typically add a few hundred pounds to the cost, and would be higher the more funds exist in the company, as a bond must be applied for to the value of the assets.

Following the enactment of ESC C16 , from 1 March 2012 any company being would up informally will have a limit of £25,000 total distribution for it to be treated as capital rather than dividend income in the hands of the shareholders.  For higher rate taxpayers the tax benefit of an MVL will likely exceed the cost of the MVL for any company with distributable cash of more than around £40,000.

If you're shopping around for a competitive fee for an MVL, please ask the following questions before accepting the lowest quote:

1. Is it a fixed fee quote, or merely an estimate, which may go up later ? I am happy to quote fixed fees.

2. Does it include all disbursements and VAT ? My quotations are fully inclusive.

3. Are the company quoting you "Licensed Insolvency Practitioners" ?  Anyone can call themselves "Consultants" or "Specialists", they're entirely unregulated.  Only a Licensed Insolvency Practitioner is legally allowed to call himself that and be appointed as Liquidator in an MVL. Insolvency Practitioners are subject to strict regulation and codes of ethics which require advertisements to be truthful and fair.  To find out whether the company you are dealing with are Licensed Insolvency Practitioners, check the government database here .

4. Will the person handling your case be the most junior in the office, inexperienced in dealing with the job properly ?  If you pay peanuts, you get monkeys.

The steps the directors should undertake to minimise the costs of the liquidation are:

1.  Wind down operations, completing existing projects and selling stock.
2.  Cease trading, make all staff redundant and pay staff entitlements.
3.  Realise all remaining assets of the company, including debts owed to the company.
4.  Sell the company's premises if owned, if leased, surrender or assign lease.  Terminate ongoing services and liabilities for utilities, rates etc.
5.  Pay all liabilities owed by the company.
6.  Arrange run-off insurance for any contingent liabilities.
7.  Resolve any outstanding litigation or other legal issues.
8.  Prepare accounts to date of proposed liquidation.
9.  Prepare PAYE, VAT and corporation tax returns to date of proposed liquidation and agree liabilities with HMRC.

If the liquidator is required to undertake any of the above work, or perhaps more specialised work such as Section 110 Reconstructions or disclaiming onerous property, then costs will increase.  Liquidators typically charge at an hourly charging rate similar to other accountants or solicitors.

Substantial discounts are available for multiple liquidations of dormant companies within a group with common directors and one holding company as shareholder.  In this case the cost could be as low as £1,500 + disbursements per company.

Philip Beck is a Chartered Accountant and Licensed Insolvency Practitioner operating since 1996 with substantial experience in undertaking liquidation, both solvent and insolvent.

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Members Voluntary Liquidation Questions and answers.

What are the tax advantages of a Members Voluntary liquidation ?

What is the procedure for putting a company into Members Voluntary liquidation ?

Can this be done informally without the expense of liquidation ?

What is Extra-Statutory Concession C16 (ESC C16) ?

What are Undistributable Reserves ?  What can be done about them ?

What is Bona Vacantia ?

How much does it cost to put the company into members voluntary liquidation ?

What is a Section 110 Reconstruction and how can it achieve a tax-efficient disposal of part of a company's business ?

What happens if creditors' claims arise during the liquidation ?

What happens at the end of the liquidation ? Can the company ever be restored to the register if necessary ?

Please note that this site deals only with company and tax law in the United Kingdom of Great Britain and Northern Ireland.   It is not applicable to other jurisdictions.