What is a Members Voluntary Liquidation?
A members’ voluntary liquidation (MVL) is the procedure to close a company if it is solvent (a company able to pay off all debts). Members’ voluntary liquidation is conducted by a liquidator known as an insolvency practitioner. They will perform all legal duties on behalf of the directors of a company, proceeding with the release of company assets, settling any outstanding creditor claims and informing the required bodies during the entire MVL process.
The process is initiated voluntarily by shareholders of a company, and requires at least 75% of the members resolve that the company be wound up and a liquidator is appointed. Once appointed, the members’ voluntary liquidation process and debts must be paid in full within 12 months.
When Is an MVL Appropriate?
A members’ voluntary liquidation can sometimes be a very fine decision and a smart route to take for several reasons. A company may have ceased trading, and the director is looking to retire, or even seek a new venture. Group restructurings as well as the sale of a company’s trade and assets are also appropriate opportunities for an MVL. It can also be a beneficial and efficient way to extract surplus cash where the business is no longer required, or when contractors are affected by IR35 changes.
Members’ voluntary liquidation explained simply; a solution to pay off debts or close a business in a clean, compliant manner, providing certainty and peace of mind for directors and shareholders.
Why Choose The Members’ Voluntary Liquidation Route?
The company must be solvent to proceed with an MVL, and is often the most tax-efficient way to close a company. One key advantage is that funds distributed to shareholders are usually treated as capital rather than income, which can significantly reduce tax liability. Shareholders may be eligible for Business Asset Disposal Relief (BADR), potentially reducing Capital Gains Tax to 10%.
An MVL also provides faster access to company funds, as distributions can be usually made shortly after the process begins. As an MVL is a formal, HMRC-recognised procedure, it gives reassurance that all obligations are met, resulting in a clean, compliant business closure.
Is an MVL Right for Your Company?
We must stress that your company has to be solvent to apply and proceed with an MVL. This means that the company can repay all debts and liabilities in full within 12 months.
If you have more than £25,000 in assets and capital to distribute, an MVL is the smart option for shareholders to save on tax. If your company is insolvent, and can’t pay off all outstanding debts, we can support you with alternatives, including administration or a Company Voluntary Arrangement (CVA).
Why Choose Griffin & King?
Griffin & King is your insolvency practitioner licensed by The Institute of Chartered Accountants in England and Wales, and we bring over four decades of expertise in handling members’ voluntary liquidation for businesses and individuals. Since 1983, we’ve provided qualified, jargon-free advice for those looking to take the MVL route, and are authorised to be appointed to handle the entire process. We know during times of business closure or restructure, it can be an emotional and overwhelming time, so our team approaches every members’ voluntary liquidation process with unwavering support and diligence.
Every step of the journey is in full collaboration with you, ensuring this is the right path to follow and all steps are legally compliant and meet your direct requirements.
Our Members’ Voluntary Liquidation Process
1. Initial consultation
Contact us for a free consultation to discuss why you want to proceed with an MLV.
2. Declaration of solvency
You will assess your company’s assets and liabilities, and then create a declaration of solvency. This will state that you have confirmed your company is classed as solvent, the names and addresses of your company’s directors, and how long it will take to pay off any debts, with this period being no more than 12 months.
3. Shareholder meeting
You will need to hold a meeting no more than 5 weeks after your declaration of solvency to pass a resolution for voluntary liquidation. 75% of shareholders must agree to proceed with the MVL. You will also have to advertise the resolution in The Gazette within 14 days.
4. Appoint the liquidator
You will appoint Griffin & King as your liquidator, and we will notify all relevant bodies, including HMRC. From this point, we act on your company’s behalf, taking control and negotiating with creditors and government bodies.
5. Assets realised and distributed
We will clear any debts with creditors and distribute remaining assets and funds to shareholders. This can be cash, property or equipment.
6. Final dissolution of the company
Once all assets are distributed and other matters completed, it is finally time to obtain clearance from HMRC, so your company can be removed from the Companies House register and be officially dissolved.
How Long Does a Members’ Voluntary Liquidation Take?
A members’ voluntary liquidation process typically takes between 6-12 months from declaration of solvency to final dissolution. However, some cases can be completed between 3-6 months, depending on the asset realisation, tax clearance and complexity of finances.
At Griffin & King, our liquidators bring decades of experience to assure the process is as streamlined as possible.
FAQs
Can I use an MVL for a dormant company?
Yes, this is a common reason why directors and shareholders proceed with an MVL. It is suitable for a dormant company provided it is solvent and able to pay all liabilities in full within 12 months. A members’ voluntary liquidation is often chosen when the company holds retained profits or assets that directors wish to extract tax-efficiently before closure.
How quickly can I access funds?
In many cases, we can provide an initial distribution of assets for shareholders within weeks of the MVL starting. We must first be satisfied that creditors can be paid in full.
Will HMRC review an MVL?
We will notify HMRC on your behalf that you are proceeding with an MVL. They may review the MVL if there are significant distributions or tax reliefs are involved. Don’t worry, this is very routine and does not indicate a problem.
Can I claim BADR?
If you meet the qualifying conditions, distributions in an MVL may be eligible for Business Asset Disposal Relief, reducing Capital Gains Tax to 10%.
Is an MVL better than a strike-off?
Often, an MVL is a formal, compliant process and can be significantly more tax-efficient where substantial funds above £25,000 are involved.
Can I do an MVL myself?
No. A members’ voluntary liquidation must be handled by a licensed insolvency practitioner, like Griffin & King, and supported by a statutory declaration of solvency. Any falsification of your statutory declaration of solvency, and you can face severe legal action.
What happens to directors and shareholders in an MVL?
Directors’ powers cease once the liquidator is appointed, while shareholders receive distributions and the company is formally closed.
Looking For MVL Specialists? Get In Touch Today
A members’ voluntary liquidation is a smart way to tax-efficiently dissolve your business and distribute assets among shareholders. If you’re looking to retire, have a dormant company that is solvent, our insolvency practitioners at Griffin & King can support the entire process.
To organise a free consultation with our team, call us on 01922 722 205, email enquiries@griffinandking.co.uk or fill out our quick enquiry form.