Members’ Voluntary Liquidation

A Members’ Voluntary Liquidation (MVL) is a process by which the assets of a company are able to be distributed to its creditors and members under the control of a liquidator who is subject to the legislative requirements of the Corporations Act 2001 (Act).

An MVL may also be used in the winding up of solvent associations and co-operatives, as the procedures set out in the Act are generally adopted by the various State Acts under which Associations and Co-Operatives are governed.

An MVL can only be used when a company is solvent, i.e. able to pay its debts (including related entity debts such as shareholders’ loans) in full within 12 months of the commencement of the winding-up.

Why would an MVL be used?

  • Simplification of a group structure wherein the more subsidiary companies the greater the compliance costs.
  • The reason for the company’s existence is no longer relevant, or the company has achieved its purpose (such as in the construction industry)
  • A family company has outlived the first and perhaps even second-generation founders and the present shareholders no longer wish to be in business together or want access to any shareholders’ entitlements they may have.
  • It provides a measure of security, as a Liquidator is appointed if the company is revived (for example, to answer historical insurance claims).
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Considerations before commencing an MVL

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The MVL Process

Upon the appointment, the liquidator will:

  • notify the ATO and other statutory bodies of the appointment of the liquidator, and advertise for any claims against the company.
  • identify and take control of all of the company’s assets.
  • instruct the company’s tax accountant to prepare the final accounts and tax lodgements up to the date of liquidation and ensure the final tax payment is made.
  • seek clearance from the ATO to distribute the company’s assets in accordance with Section 260-45 of the Tax Administration Act 1953.
  • lodge an account of the liquidation with ASIC. The company is deregistered 3 months after the lodgement of this account.
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