Members Voluntary
Liquidations
Do you have clients with old ‘asset rich’ company structures (particularly for
family businesses and farming properties) where it may be preferable and
beneficial that the assets now be in the hands of the shareholders?
Perhaps the company was set up for a particular purpose
(e.g. the development of a property) and that purpose has
been fulfilled; or the company was running a business and it
has been sold; or the members and directors are retiring.
Or maybe you wish to “tidy-up” a corporate structure
as part of a broader estate or asset protection planning
exercise.
A Members Voluntary Liquidation (“MVL”) is a process
which enables the assets of a solvent company to be
distributed (transferred) to shareholders with the
following benefits:
•
the transfer of assets to the shareholders is generally
exempt from transfer duty;
•
the distribution of pre-CGT capital profits to
shareholders is generally tax free in the hands of the
shareholders;
•
Division 7A compliance;
•
•
the ability to simultaneously transfer farming land
from company to shareholders and then to the
shareholder’s children or other family members (also
at nominal transfer duty) via family farming property
transfer exemption;
the shareholders are able to freely and independently
deal with their share of the distributed assets. This
includes the ability to sell or mortgage assets, invest
cash distributions in superannuation, or payout long
term personal borrowings;
•
the transferred assets may be held in a more tax
effective and simplified manner; and
•
the removal of cumbersome and costly company
structures that are no longer required.
www.wais.com.au
Members Voluntary Liquidation Examples
The following are actual examples of how the MVL process
has been utilised by WA Insolvency Solutions Pty Ltd to
distribute the assets of a company to its shareholders by
way of cash or “in specie” distribution:
Case 1 – Farming Company
A farming company held over $3 million in assets
including land holdings, cash and a loan account. The
major shareholder (member) was a retired farmer who
wished to receive the cash distributions from the company
and payout long-term personal borrowings. The retired
farmer’s son (a minority shareholder) was now running the
farming operations.
Solution
The farming land was transferred from the company to the
retired farmer (being the majority shareholder) at nominal
transfer duty.
The farming land was then simultaneously transferred from
the retired farmer (major shareholder) to his son (also
at nominal transfer duty) via a family farming property
transfer exemption.
The retired farmer was able to receive the cash
distributions and use the funds to payout his long term
personal borrowings.
The loan owing to the company (by the retired farmer)
was distributed ‘in specie’ to the shareholders.
Case 2 – Investment Company
An old family investment company had sold its businesses
and real estate and held cash at bank of over $4 million.
The company had 43 shareholders, including deceased
estates and beneficiaries with pre and post-CGT
shareholdings.
Solution
The $4 million was distributed to shareholders after
receiving clearance from the Australian Taxation Office.
The distribution was tax-free in the hands of the pre-CGT
shareholders.
Case 3 – Land Holding Company
The company sub-divided a family property into five lots
– sold one lot and provided vendor finance (secured by
mortgage).
Solution
The surplus assets, including balance of cash, were
distributed to the shareholders in accordance with their
percentage shareholding, with a ‘distribution in specie’ of
the four lots and the mortgage security. Nominal transfer
duty was payable on the transfer of land and mortgage
security.
The company was eligible for the small business capital
gains tax retirement concession. A payment to the
shareholders complying self managed superannuation fund
reduced the company’s taxation liability to nil.
Case 4 – Farming Company with 38 certificates
of title and 3 shareholders
A farming company held assets of over $4 million being
primarily a farming property made up of 38 separate
certificates of title and liabilities of approximately $550,000
being loans owing to the company by shareholders.
The shareholders were two brothers with shareholdings of
approximately 52% and 47% respectively and their mother,
who held a minority shareholding of only 1%. One brother
was terminally ill and wished for his portion of the farming
property to be transferred to him in order that he could
finalise his Will, while the other brother wished to lease his
portion of the farming property.
Solution
A valuation of the farming property was conducted
which detailed the value of the farming land by individual
certificate of title.
The certificates of title were able to be allocated between
the two (2) brothers so that they received a ‘distribution
in specie’ of the farming land in accordance with their
percentage shareholding and as a result, only nominal
transfer duty of $220 was assessed as payable.
The outstanding liabilities owing to the two majority
shareholders were repaid by way of distribution of the
properties.
The above examples represent a small sample of MVLs
we have conducted. WA Insolvency Solutions Pty Ltd
has extensive experience in the winding up of solvent
companies operating in a variety of industries. The
assets and circumstances in every case are unique,
so should you have any queries regarding the MVL
process or if we can be of assistance, please do not
hesitate to contact us.
WA Insolvency Solutions Contact Details:
Perth Office:
Level 12, 40 St George’s Terrace
PERTH WA 6000
Telephone: (08) 9463 3000
Fax:
(08) 9463 3099
Kalgoorlie Office:
Suite14, Kalgoorlie Business Centre
47 Brookman Street
KALGOORLIE WA 6430
Telephone: (08) 9021 7066
Esperance Office:
Suite 9, Esperance Business Centre
93 Dempster Street
ESPERANCE WA 6450
Telephone: (08) 9071 5874
Bunbury Office:
Suite 1, 9A Wittenoom Street
BUNBURY WA 6230
Telephone: (08) 9791 6466
Busselton Office:
53 Peel Terrace
BUSSELTON WA 6280
Telephone: (08) 9751 3895
Albany Office:
59 Peels Place
ALBANY WA 6230
Telephone: (08) 9841 4930
Telephone: 9463 3000
Free Initial Consultation
E-mail: wais@wais.com.au
www.wais.com.au
Disclaimer:
The material contained in this publication is no more than a general comment for the benefit of clients and associates of WA Insolvency Solutions Pty Ltd.
Readers should not act on the basis of the material without taking professional advice relating to their particular circumstances.
Liability limited by a scheme approved under Professional Standards Legislation.