What Is a Members’ Voluntary Liquidation?

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Members’ voluntary liquidation, or MVL, is the procedure followed when bringing a solvent company to a close. This formal process requires the company to be solvent, meaning that a company director must have declared that they can pay their liabilities in full.

Additionally, MVL allows a company’s shareholders to appoint a Liquidator. This individual will be required to realise all assets the company possesses and pay capital distribution to the shareholders. The Liquidator will also be in charge of making sure the company does not have any outstanding liabilities.

Arranging MVL can be a complex and delicate task. For help regarding this aspect of Business Law, contact our team of specialist solicitors at Longmores.

Four reasons why a company might be placed in members’ voluntary liquidation

There are a variety of reasons why a company may be placed into members’ voluntary liquidation. These include:

  1. Multiple shareholders want to split the assets of the company. In this instance, the assets are distributed between the shareholders. This can include assets like property.
  2. Either the company director or the shareholders are retiring. This can also occur in the event that these individuals are moving overseas or, in the case of IR35 companies, changing to full-time employment.
  3. The company is ceasing to trade. Shareholders may benefit from this as they can see more efficient tax on capital in comparisons to income tax or other matters.
  4. In order to reorganise a collection of companies. For example, as a way to close down a subsidiary company that is no longer necessary.

How long does members’ voluntary liquidation take?

From start to finish, the time it takes for members’ voluntary liquidation is roughly six months to a year. However, this is hugely affected by the complexity of the business and the situation.

To speed up this time frame, there are a few things that you can do. For instance, seeking legal advice as soon as possible, requesting that all shareholders sign a deed of indemnity, etc.

What is the process for members’ voluntary liquidation?

To start the members’ voluntary liquidation process is fairly straightforward. It involves gaining the consent of 75% of the shareholders, who most likely no longer have any need for the company.

The progression of the MVL process from the decision to do so to the execution and conclusion can be broken down into several key steps. These include the following:

Gathering the necessary documents to begin members voluntary liquidation.

Everyone involved in members voluntary liquidation, including relevant shareholders and the company accountants, will be required to give a wide variety of documentation to the Insolvency Practitioner. This will allow them to begin the liquidation process.

The information you will require include:

  • Bank details
  • Identification documents for those involved
  • HMRC references
  • All the necessary details regarding assets
  • Information about liabilities.

The company director must declare solvency

Declaring solvency means that the company is able to repay any and all debts the company may have within the next year.

By declaring solvency, the company provides a clear view of their assets and liabilities. The declaration will need to be witnessed by a solicitor and may have to be signed by multiple directors if applicable.

Appointing a Liquidator

The next step in members’ voluntary liquidation is the selection and appointment of a Liquidator. This will be done through a variety of shareholder meetings.

Following this, the company will be placed into members’ voluntary liquidation until any debts have been paid by the chosen Liquidator. Until this is completed and creditors are paid off, they will receive statutory interest at a rate of 8%. This is why it is strongly advised that all creditors are paid before the company appoints a liquidator.

Making the final arrangements for the company

After members’ voluntary liquidation has been passed, there are a number of things to be done in order to formally close the company.

  • The Liquidator selling any assets
  • Inviting anyone who may have a claim against the company to make it known and provide the necessary details in writing within 21 days – this is done by the Liquidator.
  • Settling any relevant claims against the company
  • Completion of any business proceedings and the documents necessary in order to formally close the company.
  • Removing the company from the official register of companies.

Speak to our business solicitors

To discuss members’ voluntary liquidation with our pragmatic, experienced and approachable solicitors, please get in touch. Call 01992 300333 or make an enquiry today.