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What are disbursements in a Members’ Voluntary Liquidation (MVL)?

Members’ Voluntary Liquidation must be carried out by a licensed insolvency practitioner (IP), which naturally attracts professional fees and costs. Disbursements are part of the cost of an MVL, but they are charged by third parties involved during the process rather than by the office-holder.

The liquidator must take certain steps as part of their statutory duty when carrying out a Members’ Voluntary Liquidation, which is where disbursements arise. These types of payment could also be described as third party payments as the IP has no control over the cost levels.

Begbies Traynor are voluntary liquidation specialists and can help you close down your business via solvent liquidation. We are available for appointment as liquidator, and will ensure compliance with your statutory duties as a director.

The difference between professional MVL fees and disbursements

When an IP is appointed they will charge a professional fee for undertaking the MVL process. This fee should be fixed and is dependent on the complexity of your company’s financial affairs, including the number and type of assets it owns and whether there are any creditors to pay.

This professional fee is entirely separate to the disbursements that form part of the ongoing process, and relate to specific actions the office-holder takes in the course of fulfilling their objective of liquidating the company.

Which disbursements will be charged?

Disbursements include:

Advertising the company’s liquidation

A series of four notices must be placed in the Gazette to advertise the fact that the company is undergoing solvent liquidation. This is a statutory requirement, and the fees should be charged at cost.

Statutory bond

Shareholders must take out a bond that provides protection for the company’s funds during the MVL. This is to cover the possibility of malpractice when control is handed over to the liquidator. Bond amounts vary according to the level of assets held by the company, but can range from around £50 to several hundred pounds.

Search fee

A small search fee may also be charged as a disbursement.

How and when are disbursements charged to clients?

Disbursements are paid by the insolvency practitioner as and when needed during the course of an MVL, and charged back to the client at the end of the process. So how is the cost of an MVL, plus the disbursements, charged to clients?

If circumstances allow, the liquidator may distribute a significant proportion of the company’s profits to shareholders fairly early in the process. To do this, however, the IP needs to be indemnified against the possibility of further creditors coming forward.

A proportion of the company’s funds is retained by the liquidator, and it is from this sum that professional fees and disbursements are deducted. Any remaining amounts are then distributed to the shareholders.

If you would like to find out more about disbursements in an MVL, please contact one of our experts at Begbies Traynor. We operate extensively around the country, and can offer same-day consultations to discuss your needs.

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