The Restructuring Continuum: Part 1 – Solvent Liquidations

Dealing with a Ghost

Corporate Finance & Restructuring

April 15, 2019

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Do you have a solvent company you want to retire to greener pastures?

A members’ voluntary liquidation (MVL) can be used to wind up a solvent entity in a relatively cost-effective and efficient manner.

A MVL is initiated by a company’s directors and subsequently ratified and effected by its members. It involves the orderly winding-up of the company’s affairs, the appointment of a liquidator to cease or sell its operations, quantify and realise the company’s assets, finalise payment of outstanding debts (if any), and then finally, distribution of surplus assets among members. In this form of winding up, the creditors have little to no involvement as they will be repaid in full.

A MVL is used if members have no further use for the company and it’s not experiencing financial difficulty or insolvency. In our experience there are two common situations leading to a MVL:

  1. The entity is an investment special purpose vehicle which was created solely as an investment entity, the investment has since been realised, and the entity is no longer required; or
  2. There are a number of disputing shareholders and rather than going through a costly (and likely asset erosive) litigation process, they seek the appointment of an independent person to realise assets and distribute proceeds.

The MVL enables the company to be closed down and deregistered which brings to end compliance with the legal requirements of a registered company, including payment of the annual review fee, insurance, auditor and accounting fees, lodging tax returns and preparing financial statements (if necessary).

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