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Members voluntary liquidation
Members voluntary liquidation is a winding up procedure for cases where there is sufficient money to pay everyone in full, which involves similar steps to an insolvent liquidation without the investigative aspects.
How does the procedure work?
An MVL is essentially the same process as a CVL with the following exceptions:
- The directors need to make a statutory declaration of solvency confirming that the company can meet its liabilities in full together with interest within twelve months. This must be made no more than five weeks before the shareholders' resolution to wind up the company.
- There is no creditors' meeting. As a result, the costs tend to be lower.
- The liquidator is not required to report on the directors' conduct.
- The liquidator normally has no cause to scrutinise the events leading up to the company's liquidation.
- Whilst the MVL liquidator still needs to have an insolvency licence like a CVL liquidator, the independence rules allow the company's auditor to undertake an MVL.
There is a process to allow a MVL to be converted into a CVL if it transpires that creditors cannot be paid within twelve months, eg because liabilities are higher than expected. It is however a criminal offence to make a statutory declaration without reasonable grounds for believing it to be true.
Advantages and disadvantages of administration
Advantages |
Disadvantages |
- An MVL is less expensive than a CVL. There is less formal procedure and more scope to delegate to directors.
- There is no stigma of being a director of an insolvent company.
- There is no report on directors' conduct.
- The onus on realising all assets and including all creditors is placed on the liquidator, whereas in a striking-off approach (see later) the directors would have to discharge these duties.
- It is easier for a liquidator to distribute funds and assets to shareholders than it is for directors.
- The company is dissolved after the liquidation is concluded and can normally only be reinstated within two years. (Those pursuing personal injury claims can have it restored at any time.)
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- There are penalties for overlooking creditors and incorrectly making a statutory declaration of solvency.
- The liquidation is advertised, which might attract unwelcome attention.
- It is potentially more expensive than a striking off.
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