Members Voluntary Liquidation: A Guide to Closing Your Company

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Guide to Members Voluntary Liquidation (MVL)

If you are a shareholder in a solvent limited company, you may be interested in a members’ voluntary liquidation (MVL).

The process allows for the distribution of assets to shareholders as capital rather than income, resulting in preferential personal tax rates.

To start the process, there are a few things that need to happen.

Firstly, an insolvency practitioner (IP) must be appointed to oversee the liquidation process. The IP will then need to prepare a statement of affairs, which details the company’s assets and liabilities.

Once the statement of affairs has been prepared, a meeting of shareholders must be held to pass a resolution to wind up the company.

The IP will then realize the company’s assets and distribute them to shareholders.

The length of time it takes to complete an MVL can vary, but typically takes a few months from the appointment of an IP to the distribution of assets.

However, accountants and company directors can help to speed up the process by ensuring that all necessary information is provided promptly and accurately.

What is Members’ Voluntary Liquidation?

What is a ‘member’?

A member is a shareholder of a company who has a say in business management and is considered part of the company.

Before a formal insolvency process, such as Members’ Voluntary Liquidation (MVL), can be initiated, all members must agree to it.

MVL is a formal process that is entered into to wind up the affairs of a solvent company. A solvent company is one that has more assets than liabilities and can pay off all its debts.

It involves the company’s members and their appointed Insolvency Practitioner (IP). The IP first settles outstanding debts, any legal disputes, and pays creditors through profits and the sale of assets. The remaining funds are then distributed to the members.

MVL is often preferred because it provides taxation benefits, such as enabling capital gains tax rather than income tax. In some cases, members may qualify for Business Asset Disposal Relief (formerly known as Entrepreneurs Relief), which can reduce the tax rate to 10%.

After the completion of MVL, the company in question will be dissolved.

Why is an MVL used?

When should you use an MVL

If your company has cash or asset reserves totalling more than £25,000 after all creditors have been repaid in full, it is more tax-efficient to place the company into an MVL.

Tax is charged at a rate of 10% as opposed to shareholders just drawing the monies as a dividend, which will be treated as “income” for tax purposes and therefore chargeable at anything up to 50%.

An MVL can only be used when your company is still solvent and able to meet any contractual obligations and/or debts, and clear any legal disputes. The company’s affairs must be in order and all documents must be ready for the insolvency practitioner when the MVL proceedings start.

There are a few reasons as to why you may propose that your company is liquidated when it is still solvent, such as:

  • You wish to retire and may have nobody to pass the company over to
  • You may want to start a new venture
  • Your company may have fulfilled its purpose or completed a contract
  • Your company may be redundant or unnecessary due to external changes

Liquidating your company through an MVL enables the company to be wound down and closed properly, providing the appropriate criteria of HMRC are met. Additionally, there are a range of potentially significant tax advantages that a Members’ Voluntary Liquidation can provide for shareholders.

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How Does an MVL Work?

The MVL Process

When shareholders have accumulated enough reserves within their business and no longer require the use of the company, they can opt for the MVL process.

This process involves the appointment of a Liquidator by the shareholders of the company, who will then handle the liquidation process.

To place a company into an MVL, shareholders need to pass necessary resolutions with the consent of 75% of the shareholders.

Company accountants usually recommend this process, which should be completed within 12 months of the dissolution of the company.

Information Required by the Insolvency Practitioner

Once the Insolvency Practitioner (IP) has been engaged to carry out the liquidation process, they will provide directors, shareholders, and company accountants with an information request list.

This will include details such as HMRC references, bank details, and identification documents.

Declaration of Solvency

A Declaration of Solvency must be prepared and sworn in the presence of a solicitor.

It is an up-to-date statement of assets and liabilities that demonstrates the solvency of the company.

If there are multiple directors, all or a majority of them will need to sign the document.

The company agrees that they can repay their debts within the following 12 months.

The company needs to be able to repay creditors within this time to ensure that they remain solvent throughout the MVL process, or face severe interruptions.

Appointment of a Liquidator

Meetings are held with the shareholders after the Declaration of Solvency is sworn, at which point the necessary resolutions are passed, and the appointment of a Liquidator is confirmed.

It is recommended that the company pays off its creditors before the appointment of the liquidator to save statutory interest at a rate of 8% above base rate.

After the appointment, the liquidator will advertise for additional claims, giving creditors a minimum of 21 days to provide details, after which a distribution can be made to the shareholders.

Winding Up the Company

Once the MVL is passed through an agreement of 75% of the members/shareholders in value, the company is wound up.

The Liquidator advertises the appointment in the London Gazette, inviting any persons who believe they have a claim against the company to submit details to them in writing within 21 days.

If creditor claims are received, these will need to be dealt with by the Liquidator and settled if appropriate.

The company assets are sold by the liquidator, and all relevant paperwork is completed to conclude the company’s business proceedings. The company is removed from the official register of companies.

The Liquidator also has the power to distribute any assets that are in a form other than cash to the shareholders ‘in specie’.

This means that assets such as property and land will be given a monetary value after being assessed, and a fair distribution is provided amongst the shareholders.

Once all assets have been realized and distributed, the IP/Liquidator will obtain clearance from HMRC to take the steps to close the MVL process, and ultimately, the company will be dissolved.

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How much would a MVL cost your business?

How long does a MVL take?

How to speed up the MVL process

If you want to speed up the MVL process, there are several steps you can take before an IP is appointed.

Here are some things you can do:

  • Answer the information request list in full.
  • Calculate, submit, and pay all HMRC returns and liabilities.
  • Settle all other liabilities.
  • Arrange an appointment with a solicitor to swear the declaration of solvency.
  • Transfer the company bank balance to the IP’s client account following engagement.

Assuming all liabilities have been settled before the appointment of an IP and all the required information has been provided, the distribution of company assets to shareholders can take place in as little as 21 days.

However, the time estimated for case closure and subsequent dissolution is uncertain as it depends on HMRC clearance.

Historically, it has taken approximately three months from appointment, but recently it has taken longer.

How much does an MVL cost?

The cost of a Members’ Voluntary Liquidation (MVL) can vary depending on the level of work required by the appointed liquidator.

Typically, fees range from £3,000 plus VAT and disbursements, upwards. In addition to the liquidator’s fee, you may also need to pay for advertising in The Gazette and applicable VAT.

It is important to appoint an insolvency practitioner to ensure that fees are communicated transparently and honestly. The appointed liquidator will inform you of the fees involved in the MVL process.

Despite the cost, there are many benefits to choosing an MVL for your limited company.

These include quick completion, huge tax advantages to shareholders, appropriate closure by an independent liquidator, the power to deal with problematic creditor claims, and the potential for shareholders to receive distributions quickly.


When it comes to liquidating a company, there are two main options available: Members’ Voluntary Liquidation (MVL) and Creditors’ Voluntary Liquidation (CVL).

The key difference between these two processes is that MVLs are designed for solvent companies, while CVLs are for insolvent ones.

We also have this article “Difference between MVL and CVL” you can read for a more in-depth explanation

In an MVL, the company’s members voluntarily agree to liquidate the business while it is still solvent.

The distribution of funds from the sale of assets and company profits goes to paying off any outstanding creditor debts first, and then the remaining funds are distributed amongst shareholders or members.

This process is intended to help company members and owners liquidate a solvent company while retaining as much of the funds as possible, through sales of assets and tax reliefs.

On the other hand, a CVL is initiated by the company’s creditors when the company is insolvent.

In this case, the funds gathered by the insolvency practitioner will be distributed amongst creditors immediately, as a whole.

The main aim of a CVL is to protect creditors and serve to provide them with monies owed and help to recoup losses.

It is important to note that the decision to enter into an MVL or CVL must be made carefully and with the guidance of a professional.

The costs and timescales involved can vary depending on the circumstances of the company. Therefore, it is recommended to seek professional support and advice from experienced insolvency practitioners.

If you have any questions related to whether an MVL is the best option for your company, or if you need help dealing with financial difficulties, please contact one of our experts.

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How much would a MVL cost your business?