Members Voluntary Liquidation vs Company Strike Off

If your company has no debts, you can close it down by either taking it off the Companies House register or using a formal liquidation process. 

Some of the most common ways to do so include Company Strike off and Members Voluntary Liquidation, but there are a few differences you should be aware of before you choose one. 

What is an MVL?

Members Voluntary Liquidation, or an MVL, is an official process of closing down a solvent company through liquidation. 

Members will appoint a liquidator who will oversee the company liquidation, sale of assets, distribution to creditors and shareholders and then bring about the closure of the company to Companies House. 

What does a company strike off mean?

Company strike off, or dissolution, refers to when solvent businesses apply to Companies House to have their business struck off the Register of Companies and dissolved. 

Business owners can strike off their company if the business is no longer viable, the company has fulfilled its purpose or the owner themselves wishes to retire. 

Companies cannot strike off if they’re insolvent, and instead insolvent companies should look to close their business with the help of a liquidator.

Is striking off a company the same as liquidation?

Although the terms are often used interchangeably, striking off a company is not the same as liquidation. 

Liquidation refers to the process of selling a company’s assets to pay creditors and shareholders, whereas striking off involves permanently closing down a business. 

What is the difference between a members’ voluntary liquidation and a strike off?

Striking off a business is a simple process and it only requires the company director to submit a DS01 form to Companies House. The form must be signed by all or the majority of shareholders. 

Once the form has been submitted and accepted by Companies House, the company no longer legally exists. 

An MVL however, is when a company is formally closed in a tax efficient manner. A liquidator is formally appointed by the company, and then the liquidation process will start, which is quick and easy to do. 

As soon as a liquidator is appointed, they will start their administrative duties straight away and the directors will no longer have control over the company or its assets. The liquidator will sell the assets as quickly as possible so funds can be distributed to creditors and shareholders. 

Pros and cons of a members’ voluntary liquidation

Pros of an MVL 

While the cost of an MVL is generally higher than striking off a company, it does have its own advantages including:

  • The decision is made out of your own choice
  • Debt gets written off 
  • No redundancy costs 

Cons of an MVL

On the other hand, there are some cons that you should consider, such as:

  • Liability to pay personal guarantees
  • There is going to be an investigation
  • You cannot retain business assets 

Pros and cons of a company strike off

Pros of a company strike off 

Some pros of company strike off include:

  • It is cheaper to strike off your business than go through a traditional liquidation 
  • It is a relatively straightforward process managed by company directors 
  • No investigation is needed, unlike liquidation

Cons of a company strike off 

  • Any strike off application can be rejected by stakeholders
  • Company directors of dissolved companies could be made personally liable for outstanding business debts 
  • Dissolved companies can be revived up to six years after their dissolution if there is evidence fraud has been committed 

The consequences of a strike off for a company

Once a company has been struck off the Companies House register, the company can no longer trade, sell any assets or become involved in other business activities. 

If your company is found liable for any of the above, you could face severe penalties, including a directorship ban of up to 15 years. 

If your business receives a compulsory strike off, some of the consequences will include:

  • The bank will freeze the companies accounts while the compulsory strike off action is in place 
  • Being struck off the Companies House register will reflect poor business management

The consequences of an MVL for a company

With an MVL, the company will cease to trade and a liquidator will take control of the company. They will deal with any creditors, shareholders, assets and distributions that need to be made. 

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

Should I choose a Company Strike Off or a Members’ Voluntary Liquidation?

If you’re unsure whether a Members’ Voluntary Liquidation or a Company Strike Off is the best option for you, please contact us today.