Members’ Voluntary Liquidation vs Strike Off

The Differences Between MVL vs Striking Off

Both a Members’ Voluntary Liquidation and a company’s application for Strike Off are useful tools to close down a solvent company.

Striking off application by a company

The Striking Off route is best suited to companies which have net assets up to £25,000.

If the assets to be distributed to shareholders are not more than £25,000, shareholders can automatically get capital gains treatment on a strike off (no prior application to HM Revenue & Customs required), but if the assets are above £25,000, the tax treatment will be as dividends so income tax.

Before applying to strike off a limited company, it must be closed down legally.

A notice is also advertised in the London Gazette.

A company is not eligible for striking off if, in the previous three months, it has:

A company is also not eligible if it is subject, or proposed subject, to any insolvency proceedings or compromise arrangement.

If a company does not meet these conditions, it will have to be voluntarily liquidated.

Additional considerations for striking off

  • Bona Vacantia: If the company has any remaining assets when it is dissolved, these automatically vest with the Crown.
  • Keeping records: Business documents must be kept for seven years after the company is dissolved.
  • Director liability: If a director fails to comply with the rules regarding a company’s application for striking off, he can be held personally liable to a fine and possible prosecution.
  • Restoration: A company can be restored to the register within six years of dissolution.
Further information can be found at GOV.UK.

Members’ Voluntary Liquidation

This route is best suited to companies which have net assets in excess of £25,000 or are not eligible for a striking-off application and are solvent.

Benefits of a Members’ Voluntary Liquidation?

Capital gains tax normally leads to lower tax bills than dividends, but not always, so check with your personal tax accountant first. If you do not have a personal tax accountant, we can help you.

This information is only provided for general information. For specific advice, contact us for a free no obligation consultation.

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