Members' Voluntary Liquidation
Explainer
A Members' Voluntary Liquidation is the legal formal closure of a solvent Company.
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It is called "Members" because creditors will be paid in full and therefore it is a process which directly affects the members who will receive surplus funds.
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It is called "Voluntary" because the Directors have taken steps voluntarily to place it into liquidation.
Members' Voluntary Liquidation or MVL is a legal process where a solvent company decides to shut down, liquidate its assets and distribute the proceeds to shareholders. It's a controlled way of ending the business in an orderly manner and generally tax efficient.
How does an MVL work?
Usually, an MVL is progressed once a company's useful purpose has been completed. For example, the business of the company has been sold and now the company just holds the proceeds of the sale.
In order to place a company into MVL, the directors of the company make a formal statement (called a “declaration of solvency”) saying that the company can pay all its debts within a specific period, usually 12 months.
The shareholders (also called “members”) vote to liquidate, or “wind up,” the company. This is typically done through a special resolution, where a certain majority is needed. Once approved, a liquidator is appointed to take over the process. The liquidator’s job is to gather and sell the company’s assets, pay off any remaining debts, and distribute whatever is left to the shareholders.
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The process is formal and involves submitting paperwork to the courts. Once everything is concluded, the company is officially closed down and removed from the register of active businesses.
How does it help?
There is an organised, legal process to deal with the distribution of the company's assets.
Usually, an MVL is a tax efficient method of distributing funds to shareholders once a company has ceased trading.