It’s quite some time since contractors last felt the need to ask about liquidation, but the ContractorUK Forum shows that closing a company is once again on the minds of some PSCs, writes Gareth Wilcox, director at Opus Restructuring & Insolvency.
So-called ‘dormancy’ is experiencing a resurgence too — at least in terms of being a query that contractors want solved, alongside ‘Entrepreneurs’ Relief,’ ‘TARR’ and ‘MVL.’
In the same short, sharp style that contractors are asking these questions, which are potentially motivated by the prospect of private sector IR35 reform leaving the limited company as a less viable contracting vehicle, we will raise and resolve them in this two-part guide exclusively for ContractorUK.
1. What is Liquidation?
Liquidation is a process whereby the affairs of a company are wound up by a liquidator, appointed by a resolution of shareholders, to deal with a company’s assets and distribute them, firstly to pay any liabilities and thereafter to a company’s shareholders.
Liquidation can be carried out on either a solvent or insolvent company, depending on whether it is capable of paying its liabilities. Our focus in this piece is on solvent liquidations, known as Members Voluntary Liquidations since it is the members (shareholders) who have the primary interest in the matter, as the persons who will receive the monies when any liabilities have been paid.
An insolvent liquidation is either a Creditors’ Voluntary Liquidation, or a Compulsory Liquidation.
2. What is a Members’ Voluntary Liquidation?
A Members’ Voluntary Liquidation (‘MVL’) is a process used to wind up the affairs of a solvent company. Despite this, the process is defined by the Insolvency Act 1986 (‘IA86’) and can only be conducted by a Licensed Insolvency Practitioner.
Click here for the complete part 1 of the guide in ContractorUK.