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What Is A Members Voluntary Liquidation (MVL)?

The quick answer

A Members’ Voluntary Liquidation (or “MVL”) is a procedure where a company with net assets over £25,000 is put into liquidation. The money paid out to shareholders counts as capital gains and not income – which means the funds left in the company are taxed at a lower rate.  

In more detail

MEMBERS VOLUNTARY LIQUIDATIONS IN DETAIL

A Members’ Voluntary Liquidation needs a Licensed Insolvency Practitioner like us to be the liquidator. The term “members” means “shareholders” so it is a liquidation driven by the owners of the shares.

Usually, the proposed liquidator will prepare all the statutory paperwork and meet or discuss the process with the director/shareholders. A fixed fee is usually agreed in advance for the liquidation.

The important issues for directors to consider for an MVL are:

  • Getting an accurate, up to date balance sheet showing all the assets and liabilities. This is needed for the statement of affairs.
  • Having available all the names and addresses for shareholders (the members).
  • To reduce the liquidator’s costs, it is advisable to have the company in as simple a form as possible. This means having collected in all the assets and sold them, laid off staff and paid out creditors (suppliers) where possible.
  • Often the only creditor left unpaid at the start of the liquidation is H M Revenue & Customs for corporation tax.

STATUTORY DECLARATION OF SOLVENCY

An MVL should only be used where all creditors have been paid in full or will be paid in full within 12 months from the date of liquidation.

The liquidator will ask the directors to sign a statutory declaration of solvency and warn them that it can be a criminal offence to sign a declaration knowing that creditors cannot be paid out in full within 12 months including statutory interest.

KEY POINTS TO USING KIRKS FOR YOUR MVL​

As Licensed Insolvency Practitioners we are authorised by the Court to deal with a Members’ Voluntary Liquidation. We have found the following very important to our clients:

  • We will pay the shareholders out fast – within seven days.*
  • We can fix the fee for liquidation.
  • We do not charge for letters/stamps/storage boxes.
  • We will charge for the insolvency bond and statutory adverts.

*We will need your accountant to confirm the company tax bill to do this.

THE MEMBERS VOLUNTARY LIQUIDATION PROCESS

The timeline for a typical MVL in the UK is as follows. Firstly, the insolvency practitioner will draft all the paper work and ask for the director’s help in preparing the statement of affairs (balance sheet). A date is then agreed for the proposed liquidation to take place.

You do not need to hold a creditors meeting to put a company into Members Voluntary Liquidation. You do however, have to call a shareholders’ meeting with at least 14 days notice unless at least 90% of the shareholders have consented to short notice. In that case the meeting can be held right away.

Once in liquidation, the liquidator is responsible for the company. They will take charge of the assets and bank account and agree any final creditor’s claims.

The liquidator will then make a payment to the shareholders based on the net assets left in the company. The liquidator may pay the majority of the money out leaving a small balance to pay when the MVL is closed.

MVLs normally last a short period of time and no more than 12 months.

If a MVL lasts over 12 months and there are creditors who have still not been paid, then the case will be converted to a Creditors Voluntary Liquidation. This has serious consequences for the directors (it may be considered a criminal offence) and is also likely to mean the liquidators fees will increase substantially.

A WORD OF ADVICE ON MEMBERS VOLUNTARY LIQUIDATIONS

It is a criminal offence for directors to sign a statutory declaration of solvency knowing that they cannot pay creditors in full within a 12 month period.

 

Contact Us Today

If you would like to know more about Members Voluntary Liquidation contact us today. We can help you find a positive outcome whatever your situation.

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We have just worked with Kirks to complete the closure of our company. Everything went smoothly and professionally. I would recommend this firm and the staff who were very very helpful and quickly finalised everything. Thank you Kirks.
Carol Hill
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