Solvency
Directors must have reasonable grounds for the statutory declaration that all debts, together with statutory interest where applicable, can be paid within 12 months.
Members' voluntary liquidation (MVL)
A structured closure for a solvent company.
An MVL is a statutory process for a company that can pay all liabilities, together with statutory interest where applicable, within 12 months. It allows remaining assets to be distributed to shareholders.
Before the first call
Confirm the company can meet every liability.
- Reconcile cash, debts, tax matters, contingent liabilities and shareholder balances.
- Update accounts and obtain advice on shareholder tax before deciding the distribution route.
- Identify assets that need a valuation, transfer or sale before the company can be closed.
When it may apply
An MVL may be suitable when the company has completed its purpose.
The correct route depends on the full financial and commercial position. These indicators are a starting point, not a substitute for advice.
- The business has been sold or ceased trading
- The shareholders are retiring or simplifying a group
- A project or investment vehicle has completed its purpose
- The company has distributable cash or other assets
- All creditors can be settled or fully provided for
- The directors can make the statutory declaration of solvency
Points to consider
What the board needs to understand.
We explain both the intended benefit and the practical implications before a decision is made.
Tax
Shareholders should obtain separate tax advice on distributions, available reliefs and their personal circumstances.
Creditors
Known, contingent and potential liabilities should be identified, settled or properly provided for before distributions are finalised.
Records
Accounting and tax records should be current, with bank accounts, assets, liabilities and shareholder balances reconciled.
Distributions
The timing and form of distributions depend on available cash, outstanding liabilities and the company's assets.
Timing
Early preparation can reduce delay caused by unresolved taxes, incomplete accounts, uncollected debts or unknown creditor claims.
The process
A clear sequence from advice to implementation.
- 01
Preparation
Finalise accounts, tax matters, asset values, liabilities and shareholder information.
- 02
Solvency review
The directors assess the company's ability to pay all debts and prepare the statutory declaration.
- 03
Appointment
Shareholders pass the necessary resolutions and appoint a liquidator.
- 04
Settlement and distribution
The liquidator settles remaining matters and distributes surplus assets to shareholders before closing the liquidation.
Common questions
What directors usually want to know.
Every company is different. These answers provide general guidance only.
Must every creditor be paid?
Yes. An MVL is a solvent process and requires all liabilities, together with applicable interest, to be paid or adequately provided for.
Is an MVL always tax-efficient?
No single tax outcome applies to every shareholder. Specific advice should be obtained from a suitably qualified tax adviser.
Can assets be distributed in specie?
In some cases, assets may be transferred rather than sold, subject to valuation, legal, tax and practical considerations.
What causes delays?
Common causes include unresolved tax returns, unknown creditor claims, incomplete records, uncollected debts and assets that cannot be realised quickly.
A useful first step
Discuss the facts before deciding on a process.
Answer a small number of questions about the pressure facing the company. The initial discussion is free and without obligation. Fees for any formal work are explained before an instruction is accepted.