A Members’ Voluntary Liquidation (MVL) is a formal process for closing a solvent limited company. It is a positive outcome that reflects a successful and well managed business.
When is it used?
A Members’ Voluntary Liquidation (MVL) is a process used when directors and shareholders decide to wind up a company that can fully repay its debts within 12 months. It is commonly used when directors retire, move into employment, or the business is no longer required. It is only suitable for companies that are solvent.
Steps in the MVL Process
- Declaration of Solvency: Directors (all or the majority) swear a statutory declaration confirming the company is solvent and able to repay its debts within 12 months.
- Appointment of Liquidator: At an Extraordinary General Meeting, at least 75% of shareholders agree to appoint a licensed insolvency practitioner (IP).
- Statutory Advertising: The appointment, resolution, and notice to creditors must be publicly advertised in the Gazette.
- Companies House Filings: Necessary documents are filed at Companies House, including the Declaration of Solvency.
- Asset Realisation: The IP realises the company’s assets and settles all outstanding creditors in full (with statutory interest where required).
- Distributions to Shareholders: The IP and shareholders agree a distribution strategy. Once liabilities, costs, and expenses are settled, the remaining assets are usually distributed as capital.
- Final Dissolution: The company remains active on the register during liquidation. Once all matters are completed and the closing report is filed at Companies House, the company is dissolved after three months.
Role of the Insolvency Practitioner
The IP is a licensed professional who manages statutory compliance, asset realisation, creditor settlements, legal steps, and the company’s final dissolution.
Fees & Disbursements
Fees vary based on the complexity of the case and the size of the company’s assets.
Disbursements can include:
- Statutory advertisements (3 notices)
- Statutory bond
These are deducted from company funds, and reserves may be held to cover any late claims.
Tax Benefits
Shareholder distributions are typically treated as capital rather than income. Many shareholders may qualify for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), which reduces Capital Gains Tax to 14% (rising to 18% in April). Shareholders should always seek personal tax advice.
Before You Start: What to Expect
- Confirm the company’s financial position and solvency and consider the best timing for the MVL.
- Engage an IP to provide advice and guide you through the process.
- Prepare key documents such as the Declaration of Solvency and board/shareholder resolutions.
- Allocate funds for professional fees, disbursements, and creditor claims.
- MVLs can be efficient and tax beneficial when managed with the right professional guidance.
‑beneficial when managed with the right professional
Talk to us
If you’re thinking about a planned exit, an MVL can be an efficient, professional way to realise value and distribute proceeds.
Contact our team today for a discussion about whether an MVL is right for you.
