A Members’ Voluntary Liquidation is the process of winding up a solvent company. It is done when the members no longer wish to retain the company structure. There can be a number of reasons for the members wanting to do this, but usually it is because the company has reached the end of its useful life.
If the company is wound up at a meeting of its members, it is called a voluntary winding up. If the company is solvent when it is wound up, it is a called members’ voluntary winding up or a members’ voluntary liquidation. This is different to a voluntary liquidation where the company is insolvent prior to liquidation.
Successful business owners who are looking to realise the proceeds of the business via a sale or who have decided to change their corporate structure and need to distribute any value to the relevant shareholders of the company.
The directors will resolve to call a meeting of the members to wind up the company. The directors must complete a ‘declaration of solvency’ stating that the company is solvent and that the company can pay all its debts within 12 months. This declaration is lodged with ASIC prior to the members meeting.
At the meeting the resolution is passed to place the company into liquidation. The solvent company is wound up on the resolution of its members at the duly convened meeting and A liquidator appointed.
The control of all assets, the conduct of any business and other financial affairs are transferred to the liquidator. The liquidator ensures that outstanding creditors are paid in full and protects the members’ interests while the company structure is dismantled and any surplus assets are distributed to its members.
When a company structure is no longer required by the directors/shareholders. A company structure could no longer be required for a variety reasons. As mentioned above, the directors may decide to sell the business or change the corporate structure for legal or tax reasons.
The affairs of the company are fully wound up. Depending on the circumstances, there may be favourable tax benefits for the shareholders.
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