6 Steps To Expect During Members Voluntary Liquidation

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Company directors looking to efficiently close down their solvent company often opt for members voluntary liquidation (MVL). This voluntary process can be favourable for a number of reasons, but regardless of the strategic thinking behind the decision to initiate a MVL, the process largely follows the same steps. Taking the time to understand these not only gives wider context to how long an MVL might take but also helps company directors to ensure that the process is a suitable one for their business.

1. Insolvency Practitioner Appointed

Before any formal process begins, it is important that company directors consult a licensed Insolvency Practitioner to find out whether members voluntary liquidation is a suitable option. Should MVL be viable, an Insolvency Practitioner must then be officially appointed to oversee and administer the liquidation process. This individual will take control of the company’s assets, ensuring a smooth process that is compliant with all legal requirements.

2. Declaration Of Insolvency

The company directors must then create a statutory Declaration of Solvency which asserts that the company can settle its debts within a specified timeframe (usually not exceeding 12 months). This declaration is vital as it proves that all creditors can be paid by the company, preventing unexpected claims which may result in insolvency. To prove that assets are greater than liabilities, directors can expect to provide a statement of assets and liabilities alongside the Declaration of Solvency.

3. Shareholder Meeting

Once the Declaration of Solvency has been sworn in the presence of a solicitor, it is up to company directors to propose a resolution to shareholders that recommends the winding up of the company. This resolution must be passed at a general meeting of shareholders, with at least 14 days’ notice provided ahead of the meeting. 75% of shareholders must then agree to the members voluntary liquidation as this signals the collective agreement to proceed with the liquidation process.

4. Creditors Informed

After shareholder approval, relevant parties must be notified of the decision to liquidate the company. Firstly, companies must announce the decision in the Gazette within 14 days. Individual creditors must also be informed of the winding up of the company within 28 days. This is one of the most essential members voluntary liquidation steps as it gives creditors a period in which they can submit their claims and assert their rights.

5. Assets Sold & Funds Distributed

Once the window for creditors to make claims closes, the appointed Insolvency Practitioner will take charge of the company’s assets, converting them into cash and settling any outstanding debts. Creditors will be paid in the order laid out by the Insolvency Act 1986 and then remaining funds will be distributed to shareholders. Historically, these payments could only be made once HMRC had provided tax clearance via a letter. However, this could often lead to lengthy delays due to a backlog of cases with HMRC and, as of December 2023, new guidance means that the MVL process can now proceed on the basis of the Insolvency Practitioner’s judgement. These changes should reduce frustrating delays that often occur at the very end of members voluntary liquidation.

6. Dissolution

The final members voluntary liquidation step is to dissolve the company. With assets sold, creditors repaid and funds distributed to shareholders, the Insolvency Practitioner can then file the final accounts with Companies House and apply for the company to be struck off the Companies House Register. Once this has taken place, the MVL process is complete and the company will cease to exist as a legal entity. 

With the appointed Insolvency Practitioner playing a pivotal role throughout all of the members voluntary liquidation steps, it is essential that you consult somebody you can trust. The team of licensed insolvency practitioners here at My Liquidation have years of experience helping company directors through the MVL process; rest assured, you are in safe hands when you seek our advice. Don’t hesitate to get in touch today to find out if members voluntary liquidation is right for you and/or commence the formal process.

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