MEMBERS VOLUNTARY LIQUIDATION SUPPORT

The process for Members Voluntary Liquidations will generally start with an insolvency practitioner consultation. The purpose of this meeting will be to assess the relevant firm’s current financial position (liabilities, assets, cash flow, etc.), levels of solvency, and its overall suitability for the MVL process. 

As part of an initial insolvency consultation, the expert on hand should be able to clearly provide you with the necessary information you need to make as informed a decision as possible. They will also be on hand to offer guidance should a MVL ultimately not be the best solution — providing information regarding the alternatives and how they might better suit your situation.

A licensed insolvency practitioner will be needed to administer a MVL. This is non-negotiable as it’s a part of the officially recognised process. The importance of the role necessitates careful consideration and research. You’ll want to be absolutely positive that you’re dealing with an experienced professional with a proven track record. 

Once the necessary research is completed, you should appoint an IP who will oversee and administer the Members Voluntary Liquidation, and, ultimately, the closure of the firm. 

Before a Members Voluntary Liquidation can begin, all directors must sign an official Declaration of Solvency. This states that the company can repay any and all existing debts within the next 12 months. It should include contingent liabilities, which are payments that may not need to be paid, but remain possible. Examples of this include customer complaints and employee tribunals. 

The reason the Declaration of Solvency is so essential is that it’s vital that the company can repay creditors, and to also ensure that these creditors are aware of the planned closure. This is because any unforeseen claims as far as the business are concerned, could scupper any MVL plans and tip the business into insolvency, requiring alternative closure methods.

Once solvency has been officially declared, the next step in a Members Voluntary Liquidation is to cast a vote, or resolution to wind up, among company shareholders. 

If, and only if, 75% of shareholders vote in favour of winding up the company via Members Voluntary Liquidation, can the process continue to the next stage.

An advert stating the planned closure of the business must be posted in The Gazette within 14 days of the resolution being made. The purpose of the advert is to alert any further potential creditors of the intended closure, allowing them to submit any potential repayment claims that may be made.

As part of the Members Voluntary Liquidation process, all business assets are summarily sold by the appointed liquidator. Company creditors maintain the right to full repayment. This means that the sale of assets will initially go directly to paying creditors, and only once this goal is achieved can any remaining funds be distributed internally. 

As highlighted above, a MVL can afford shareholders with some Business Asset Disposal Relief, which can make this form of liquidation an attractive prospect from a tax perspective.