With the 2019 budget recently announced, and the Income tax deadline fast approaching, you may be considering retiring from the company you started many years ago, and asking yourself how you can do this?
There are a number of ways to effectively wind down your business that can be done in a tax efficient manner. One of these is through the process of a Members Voluntary Liquidation (“MVL”). This process, compared to the Creditor Voluntary Liquidation, is for solvent companies, meaning there are cash or assets there to extract from the company for the benefit of the shareholder. The MVL process can take between 4-12 months to file the final paperwork at the Companies Registration Office (“CRO”), depending on the complexity of the case.
The process includes the following:
- A meeting with the directors and shareholders to pass a resolution to place the company into liquidation and appoint a liquidator;
- The value of the assets and liabilities for the company must be brought up to within three months of the date of liquidation;
- A form, known as an E1-SAP (Declaration of Solvency), will be approved at the meeting of the directors and will summarise the assets and liabilities. This will be accompanied by an independent accountant’s report confirming the company’s assets and liabilities and the opinion of the directors of the company that the company will be able to pay its debts in full;
- The nominated liquidator will issue the directors with a letter of consent to act;
- Once appointed, the liquidator will file the E1-SAP, shareholder resolution and notice of his/her appointment with the CRO;
- The liquidator will then take control of the assets of the company and write to all parties affected by the liquidation;
- The liquidator will ensure that all tax returns are brought up to the date of liquidation;
- Once confirmation from the Revenue Commissioners is received that all returns are in order and clearance is issued, a distribution can be made to the shareholders;
- Final meeting is then called and the final returns are made to the CRO.
Independent tax advice by the shareholder on the distribution received is highly recommended.
If the company is not being passed to the next generation, the MVL process is the simplest way to extract value from the company’s assets you have been accumulating for some years.
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