A Members Voluntary Liquidation (MVL) is a formal process used to wind up the affairs of a solvent company meaning it has sufficient assets to pay all of its liabilities in full, including statutory interest and any taxes owed.
This process is typically chosen when:
-
A business has reached the end of its useful life
-
Company directors or shareholders want to retire
-
A restructuring or group simplification is taking place
-
Shareholders wish to extract retained profits in a tax-efficient way
The MVL allows shareholders to receive distributions from the company (including cash and assets) as capital rather than income, which can result in significant tax savings, especially if Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) applies.
For more in-depth information on the benefits, visit Purnells’ members voluntary liquidation page.
Key Features of a Members Voluntary Liquidation
-
Only suitable for solvent companies
-
Requires a Declaration of Solvency signed by the directors
-
Must be overseen by a licensed insolvency practitioner
-
Usually results in the company being struck off the Companies House register after closure
-
Distributions to shareholders are often taxed under Capital Gains Tax (CGT) rules, not Income Tax
How Does a Members Voluntary Liquidation Work?
Here’s a step-by-step guide to how the MVL process unfolds:
1. Engage an Insolvency Practitioner
The first step is to appoint a licensed insolvency practitioner to act as the liquidator. Firms like Purnells offer free consultations to assess your company’s eligibility and explain the process.
2. Prepare a Declaration of Solvency
Before the liquidation can begin, a majority of the directors must swear a Declaration of Solvency. This document confirms that:
-
The company can pay all of its debts (plus statutory interest)
-
All liabilities will be paid in full within 12 months of the liquidation
Swearing a false declaration is a serious offence, so it’s essential that directors are confident in the company’s financial position typically supported by recent accounts and cash flow forecasts.
3. Pass Resolutions to Begin Liquidation
Once the declaration is signed, shareholders must pass a special resolution (75% majority required) to place the company into members voluntary liquidation.
This can usually be done at a general meeting, or via written resolution for private companies.
4. Liquidator Takes Control
From this point, the liquidator takes over the company’s affairs. Their role includes:
-
Realising assets (selling or distributing them to shareholders)
-
Settling outstanding liabilities
-
Filing necessary paperwork with Companies House and HMRC
-
Distributing surplus funds or assets to shareholders
Experienced liquidators, such as those at Purnells, are skilled at handling these responsibilities efficiently and cost-effectively.
5. Final Distribution and Closure
Once all creditors have been paid and final tax matters are settled, any remaining funds or assets are distributed to shareholders.
After the process is complete, the company is dissolved and removed from the Companies House register.
What Are the Benefits of an MVL?
A members voluntary liquidation offers several advantages over simply striking off a company:
-
Tax Efficiency: Distributions can qualify for Capital Gains Tax rather than income tax
-
Business Asset Disposal Relief: Shareholders may benefit from a 10% CGT rate on qualifying gains
-
Certainty: Creditors are formally dealt with, reducing risk of future claims
-
Professional Oversight: The process is managed by a qualified liquidator, ensuring compliance with all legal requirements
-
Faster Access to Funds: Assets can often be distributed quickly once liquidation begins
To explore whether your company qualifies and what tax savings might apply, speak with the team at Purnells.
When Is an MVL Not Appropriate?
A members voluntary liquidation is not suitable for insolvent companies i.e., where liabilities exceed assets or the company cannot pay its debts as they fall due. In those cases, a Creditors Voluntary Liquidation (CVL) would be the correct route.
Also, if retained profits are under £25,000 and no further trading is planned, a company may qualify for a simple dissolution, though this often carries greater tax liabilities.
Choosing between an MVL and other options depends on your company’s circumstances. The specialists at Purnells can advise on the most appropriate exit route for your situation.
How Long Does a Members Voluntary Liquidation Take?
The MVL process can vary in duration depending on the complexity of the company’s affairs. However, a straightforward MVL can often be completed in 6 to 12 months.
Some initial distributions to shareholders may be made much sooner sometimes within weeks of the appointment, depending on asset realisation and HMRC clearance.
Engaging proactive and experienced liquidators, like those at Purnells, can significantly shorten the timeline.
Final Thoughts
A members voluntary liquidation is an efficient, tax-savvy way to close a solvent company and release retained profits. Whether you’re planning retirement, restructuring, or simply tidying up a dormant entity, an MVL offers transparency, compliance, and potential tax benefits all with the reassurance of professional oversight.
To find out if your company is eligible for an MVL and how to begin, reach out to the expert team at Purnells for a free consultation.