Members' Voluntary Liquidation (MVL) - Frequently Asked Questions (FAQ)
To understand more about a Members’ Voluntary Liquidation (MVL), here are some common facts on an MVL as well as it’s impact on directors and shareholder:
General FAQ on MVL
Members’ Voluntary Liquidation (MVL) is a voluntary process for solvent companies to wind down operations, distribute assets, and allocate surplus funds among shareholders.
MVL is commonly chosen when companies wish to cease operations due to reasons like retirement, restructuring, or project completion while remaining financially solvent.
To be eligible for MVL, your company must be solvent, meaning it can settle all debts and obligations within 12 months, as confirmed by a formal declaration of solvency.
Shareholders appoint a licensed insolvency practitioner as the liquidator during a general meeting.
Shareholders appoint a licensed insolvency practitioner as the liquidator during a general meeting.
The liquidator oversees asset realization, debt settlement, and ensures compliance with legal requirements throughout the MVL procedure.
Surplus funds distributed to shareholders may be treated as capital gains, potentially leading to reduced tax liabilities compared to dividends.
On average, MVL takes about 2.5 years.
- Strict legal compliance is essential, including adherence to statutory obligations, notification of authorities, and transparent financial transactions.
Given the complexity of MVL, it is advisable to seek guidance from a qualified insolvency practitioner or a corporate service provider well-versed in Singapore company law.
Generally, once MVL commences, it is considered a one-way process. However, in complex legal situations, professional advice is crucial to explore potential options.
FAQ for Directors on MVL
MVL is a voluntary process initiated by directors when a company is solvent and aims to distribute its assets to shareholders. It’s a proactive step to wind up the company’s affairs.
Directors should consider MVL when the company is solvent and there’s no longer a need to continue its operations. It allows for an organized distribution of assets among shareholders.
Directors are responsible for overseeing the MVL process, including appointing a liquidator, ensuring the company’s affairs are properly wound up, and assisting in the preparation of financial statements.
In MVL, directors are generally shielded from personal liability for company debts, as it is initiated when the company is solvent. However, fraudulent activities or breaches of fiduciary duties can lead to personal liability.
Directors typically recommend a liquidator to shareholders, who must approve the appointment by a special resolution. The liquidator will oversee the distribution of assets to shareholders.
Directors continue to assist the liquidator throughout the process, providing information on company assets and liabilities, ensuring the statutory requirements are met, and facilitating the efficient distribution of assets.
In MVL, shareholders are typically the beneficiaries. After paying off company debts, any remaining assets are distributed among shareholders according to their shareholding.
Directors have the right to oversee the liquidator’s actions to ensure they are in the best interest of shareholders. If concerns arise, directors can seek legal advice or engage with shareholders to address them.
Directors benefit from the planned distribution of assets, and the company is wound up in an orderly manner. It allows for the distribution of surplus assets to shareholders.
The duration of MVL varies based on factors such as the complexity of the case and the assets involved. It usually takes several months to conclude, during which the liquidator maximizes returns for shareholders.
FAQ for Shareholders on MVL
MVL typically involves the distribution of company assets to shareholders. Your shares will be cancelled, and you will receive your portion of the surplus assets.
Asset distribution is typically based on the proportion of shares each shareholder holds in the company.
Tax treatment may vary based on individual circumstances. Consult a tax professional for personalized advice.
Shareholders typically have a say in appointing the liquidator during a general meeting in Singapore.
MVL often offers tax advantages for shareholders in Singapore and allows for an organized wind-down of the company’s affairs.
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