Members Voluntarys Pty Ltd

Members Voluntarys Pty Ltd was formed in 1989 to provide accounting practitioners with a convenient low priced service of disposing of their clients unwanted solvent companies through the process of members’ voluntary winding up or deregistration.

Our services are available to accounting practitioners in all Australian states and territories.

When a solvent company has passed its date of use and it does not satisfy the criteria for deregistration then members’ voluntary winding up (MVOL) is the only permitted way to dispose of such company.

There is no other viable alternative to the MVOL process in instances where a company no longer has commercial use and where the members can gain some benefits by the company being liquidated.

If your client’s company has ever conducted business in its own right or as the trustee of a trust then you should always consider MVOL rather than Deregistration as a matter of RISK management.

Benefits from member voluntary’s winding up:

Tax Benefits:

One of the main reasons to place a company into a Members Voluntary Liquidation is to maximize the CGT concession benefits where there are proceeds from the sale of a pre-CGT asset or where there are Small Business CGT concessions available. The liquidator’s distribution of the company’s assets, represented by these funds, is generally tax free and it may stay tax free in the hands of shareholder(s) (Conditions apply).

If a company has made payments out of the same funds to their shareholders prior to winding up then these payments are generally deemed to be dividends (mostly probably unfranked).

There are some other “side” benefits from MVOL which may in some circumstances be valuable for your client’s company.  

MVOL versus Deregistration – A few pros and cons that should be considered

DEREGISTREATION:

• Deregistration is a simple, easy and cost effective process;

• On the date of the company’s deregistration with the Australian Securities and Investments Commission (ASIC):-
  • the company ceases to exist as a legal entity and can no longer do anything in its own right;
  • deregistration with ASIC does not affect the company’s file with the Australian Taxation Office (ATO);
  • the directors of the company immediately before deregistration must keep the company’s books and records in an accessible form (either printed or electronic):-
    • for three (3) years) for the purpose of the Corporation Act 2001 (Act) (see  SECT 601AD(5) of the Act – contravention of this section is an offence of strict liability);
    • For five (5) years for the purpose of the Income Tax Administration Act 1936 (INCOME TAX ASSESSMENT ACT 1936 – SECT 262A );
    • The company’s books and records must be made available for an audit for a prescribed time period to any of  the statutory bodies if required.

• Number of aggrieved parties may request the ASIC to reinstate the deregistered company. Reinstating is a simple and cheap process which will restore a company as if it was never deregistered.

MEMBERS VOLUNTARY WINDING UP:

• Members voluntary winding up is available only to solvent companies.

• MVOL is more complicated, time consuming and more costly than deregistration.

• The winding up of solvent companies must by conducted according to the following legislations:-
  • Corporation Act 2001
  • Insolvency Practice Schedule (Corporations) (Schedule 2 of the Corporation Act 2001)
  • Corporations Regulations 2001
  • Insolvency Practice Rules (Corporations) 2016

• Liquidator generally does not declare the dividends unless he/she has not received the tax clearance for the company from the Australian Taxation Office (ATO).

• When the ATO issues the tax clearance for the company it effectively shuts down all of the company’s tax files.

• Where the liquidator distributes a particular fund or account within the company’s books and records this distribution maintains its character when being returned to the shareholder.

• All available tax losses (if any) are utilised in the liquidator’s distribution.

• Liquidator’s payments made during the liquidation process are generally referred to as dividends but they are not all taxed as dividends for tax purposes.

• The liquidator’s distribution of the company’s surplus assets represented by the Paid up capital, Share premium reserve, Capital profit reserve (Pre-85) and Capital profit reserve (Post-85 tax exempt) sourced from the available Small business CGT concessions may stay free of tax (conditions apply) in the hand of the shareholder(s).

• Balance of the franking credits can be utilised for the liquidator’s dividend to members sourced from the company’s Income Profit reserve.

• ASIC deregisters the company automatically three months from the date when the liquidator advises their office of finalisation of liquidation.

• The company’s books and records should be kept:-

• For the purpose of the Corporation Act 2001 
  • for five years from the date of deregistration, however
  • with ASIC consent the company’s books and records may be destroyed six (6) months after the date of deregistration (The liquidator’s application for ASIC consent is a part of our standard procedures.)

• For the purpose of tax law  – INCOME TAX ASSESSMENT ACT 1936 – SECT 262A (please seek your own expert tax advice as to the interpretation of section 262A of the ITAA 1936)

• Only the Court may order the ASIC to reinstate the company. Application to the Court to reinstate the company is time consuming, costly and its outcome is uncertain.

Office:	03 9585 5227
	03 9585 4155
Email:	[email protected]
All correspondence:	Members Voluntarys Pty Ltd PO Box 819 Moorabbin, VIC 319