Checking this is how Liquidation works

[Maslins]

why do you only do 50% approx DIS on appointment or just prior and not the full 100%?

Surely Insurers discount the Bond if no cash involved for the Liquidator.

If a creditor claim were to be lodged, we're on safer ground if we've only distributed half the funds and still have a fairly significant asset we legally control (the remainder of the shareholder loan). We can call some/all of that loan in to clear the creditor. If we'd distributed 100% of the funds on day one it would be far more awkward. We'd still have some recourse against the director/shareholder, as the situation would only arise if they'd told us porky pies at the outset (irrespective of whether deliberately lying or just forgetting), but it would be a lot more painful to deal with, potentially making the initial distribution invalid, or turning the MVL into a CVL. Any creditor wouldn't be happy with us if we distributed 100% of funds before the advertised period for creditors to object had passed. Also often the two distributions will straddle a personal tax year, so quite regularly there's over a grand to be saved in tax by separating them (10% on ~£12k extra annual exemption).

We're hoping to get a hefty discount on bond prices at our next renewal. Until then, they'll stay as they are (easy money for the insurer!).

[john@UKCA]

As an aside, MVL Online a few months ago migrated to the route of client withdrawing the cash in advance. This is temporarily a loan, then MVLO declare distributions in specie over the course of the liquidation to clear the loan.

why do you only do 50% approx DIS on appointment or just prior and not the full 100%?

Surely Insurers discount the Bond if no cash involved for the Liquidator.

[Maslins]

As an aside, MVL Online a few months ago migrated to the route of client withdrawing the cash in advance. This is temporarily a loan, then MVLO declare distributions in specie over the course of the liquidation to clear the loan. A few benefits from client perspective:
- client gets all the cash straight away. It takes some of the big banks multiple months to process liquidator requests, which would mean painful delays to clients getting any cash,
- client retains control of the company's cash the whole time (at no point do we touch it).

On the negative side:
- the bond is still payable, seems this causes more client annoyance than it used to. Legally if there's a big loan to shareholders following liquidator appointment, the liquidator could call in that debt, and theoretically then misappropriate funds. The new route doesn't avoid the bond being payable.
- bizarrely clients were always super thankful when we made big payments to them (even though it was "their" money!)...with the new route clients are a bit more "meh!".

[Mr.Whippy]

Not sure there is any risk of losing BADR using the dividend in specie route following HMRC publication CTM61559.

https://www.gov.uk/hmrc-internal-man...anual/ctm61559

OK hadn't read that previously but I think I'd still have gone the same way as I did. For the sake of a few weeks waiting (on the bank, not the liquidators I hasten to add) it suited me.

I didn't realise you could withdraw the funds directly to yourself before appointing a liquidator though, so you learn something new every day

[john@UKCA]

The MVL involved a significant sum and losing CGT & BADR on it would've incurred tens of thousands of additional CGT liability. So for the price of the bond & a bit longer waiting for the money I decided to take that route

Not sure there is any risk of losing BADR using the dividend in specie route following HMRC publication CTM61559.

https://www.gov.uk/hmrc-internal-man...anual/ctm61559

[Mr.Whippy]

That's different to the Distribution in Specie route whereby you withdraw the funds prior to appointing Liquidator - becomes a non cash MVL which also reduces the Bonding Fee.

Sure, I know how a distribution in specie works. I was in no rush and could wait for the money. It was more important to me to remove the risk, no matter how small, of the distribution being seen as personal income and not a capital gain and affect any BADR claim.

The MVL involved a significant sum and losing CGT & BADR on it would've incurred tens of thousands of additional CGT liability. So for the price of the bond & a bit longer waiting for the money I decided to take that route

[john@UKCA]

I took that route, with MVLOnline. Account was frozen and they collected the funds and transferred the majority (90% or so) of it to me very quickly.

the remainder they held onto until they got HMRC clearance and they sent it immediately once they did.

That's different to the Distribution in Specie route whereby you withdraw the funds prior to appointing Liquidator - becomes a non cash MVL which also reduces the Bonding Fee.

[Mr.Whippy]

I took that route, with MVLOnline. Account was frozen and they collected the funds and transferred the majority (90% or so) of it to me very quickly.

the remainder they held onto until they got HMRC clearance and they sent it immediately once they did.

No experience of Begbies Traynor, but they are legit...

as for MVLOnline, I couldn’t recommended them highly enough. Always very quick (<5 mins some times) to respond to emails and clearly explain everything in detail and also very proactive in contacting me when they said they would or when it was required. With a larger outfit, you may find they are a little slower to respond etc (only basing this on their size as in general the bigger an outfit, the slower they can be!)

[john@UKCA]

Hi All,

Obvious questions are:

1) Is this the standard way of doing a liquidation (if we end up with the cash anyway, why doesn't it just get transferred to us)

Go the other route if you are worried about it - you distribute funds just prior to placing into liquidation and then the Liquidator immediately declares a "Distribution in Specie" for your shareholder loan thus wiping out any liability you have to the company.

[courtg9000]

Begbies Traynor are a massive outfit. I don't think there is anything untoward.

[Maslins]

1) lots of different ways of getting to the same end result (funds from company account to your personal account). I wouldn't say it's "the standard way of doing a liquidation", but I can sympathise with their comments that leaving funds in the company bank account and them writing to your company's bank post appointment can take months to get a successful outcome, highly dependent on which bank your company's account is with. Having said that it is of course worth you're comfortable with the alleged liquidator, that they're not some scammer...but if this is indeed Begbies Traynor, you're fine.
2) Begbies Traynor are absolutely enormous, not some Johnny come lately company, so this is extremely unlikely. Even if it were to happen, I'd expect your funds would be clearly held separate to their own business funds.
3) I'd imagine so (like I say, they're huge), though I don't know anyone personally.

[northernladuk]

Why not use MVLOnline and be at peace that the people you are sending it to can be trusted?

[TimeToQuit]

Hi All,

About to kick off the formal process of Liquidating (MVL) our company, and I want to check that what I am being told is correct, above board, and how its normally done....

"The liquidator is required to collect the assets of the Company following their appointment. To avoid any unnecessary delays in writing to the Company’s bank, who would freeze the account and remit the closing balances to the liquidation estate (a process that can take months), we ask that the Company’s available cash at bank is transferred to us, the proposed liquidators, prior to liquidation. We would then hold the funds pending the date of liquidation which would put us in a good place to distribute the money to the shareholders shortly after liquidation. I will send across details of our bank account details closer to the time and when required."

Feeling slightly nervous about the prospect of transferring a massive amount of cash to a company I have never met (its all been done by email and video chat) into their company account.

Company is Begbies Traynor

Obvious questions are:

1) Is this the standard way of doing a liquidation (if we end up with the cash anyway, why doesn't it just get transferred to us)
2) What happens if we transfer the cash and then their company goes under?
3) Anybody else used this company, and done the transfer this way?

Thanks all