Members' voluntary liquidation (MVL) is for a company that can pay all its debts, with interest, within 12 months. It suits directors who want to retire or no longer want to run the company. A licensed insolvency practitioner acts as liquidator, sells the assets, pays the creditors and distributes what is left to the shareholders.
Choose between MVL and strike off
Striking the company off costs far less, but a payout to shareholders is treated as capital only up to a limit. If you expect to pay out more than that, an MVL is the route to consider, because the liquidator's distributions are treated as capital however large they are. You pay the insolvency practitioner's fees, so get quotes from more than one.
What to do
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Check the company's finances and tax
Prepare up-to-date accounts, list the assets and liabilities, and file any tax returns that are outstanding. HMRC no longer gives tax clearance in an MVL, so the liquidator must satisfy themselves that all returns are filed and all tax paid before closing the case.
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Choose an insolvency practitioner
Use an authorised insolvency practitioner, compare quotes and agree their fees.
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Make the declaration of solvency
The directors sign it in front of a solicitor or notary public, with a statement of assets and liabilities. If there are more than two directors, a majority is enough; if there are two or fewer, both must sign.
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Hold the general meeting within 5 weeks of the declaration
Shareholders pass a special resolution to wind the company up voluntarily and appoint the liquidator.
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Advertise the resolution and file the declaration
Publish the resolution in the Gazette and send the declaration to Companies House, or to the Accountant in Bankruptcy for a Scottish company, by the deadlines in the table below.
Make the declaration of solvency
The declaration states that the directors have fully inquired into the company's affairs and believe it can pay its debts, with interest at the official rate, within a period of no more than 12 months from the start of the winding up.
At the same meeting that passes the winding-up resolution, the shareholders appoint the liquidator.
What the liquidator does and what you do
From the liquidator's appointment all the directors' powers end, unless the shareholders in general meeting or the liquidator allow them to continue. You must give the liquidator the information they ask for and hand over the company's assets, records and paperwork.
The liquidator sells the assets, pays the creditors in full with interest and the final VAT bill, and distributes the surplus to shareholders. When the affairs are fully wound up they prepare a final account, which goes to the shareholders and then to the registrar.
Share out all the company's money before it is removed from the register, because anything left goes to the state.
Tax on what you receive
Your distribution is not a dividend. You are treated as having disposed of an interest in your shares, so work out a gain by deducting what you paid for them and report it on your Self Assessment return.
To qualify for Business Asset Disposal Relief on shares, for at least 2 years you must have been an officer or employee of a trading company and held a minimum share of its shares and votes, which makes it a 'personal company'. If the company has stopped trading, you still qualify if the disposal is within 3 years.
If the company turns out to be insolvent
If the liquidator forms the opinion that the company cannot pay its debts in full within the period in the declaration, they must send the creditors a statement of the company's affairs within 7 days. The creditors can nominate a different liquidator, and the winding up becomes a creditors' voluntary liquidation. In that liquidation the liquidator reports on what went wrong, and a director can be disqualified for 2 to 15 years if their conduct was unfit.
If the debts are not paid or provided for within the period in the declaration, it is presumed that the directors had no reasonable grounds for their opinion. A director who makes a declaration without reasonable grounds can be imprisoned or fined.
Legal basis
Primary legislation and key regulations