Members’ Voluntary Liquidation
At Campbell Crossley & Davis, we support company directors through important decisions. One of those is knowing when and how to close a limited company that has served its purpose. If your company is solvent and can pay its debts in full, a Members’ Voluntary Liquidation (MVL) might be the most tax-efficient and secure way to close it down.
Our licensed insolvency practitioners help you every step of the way, ensuring the process is handled professionally and without stress.
What Is a Members’ Voluntary Liquidation?
A Members’ Voluntary Liquidation (MVL) is a formal liquidation for solvent companies. If your company can repay all debts, including interest, within 12 months, it qualifies as a solvent company and may use this process.
An MVL lets company directors wind up the business in an organised way. Unlike insolvent liquidations, where creditors come first, an MVL focuses on distributing remaining company assets to shareholders after all debts are cleared.
Many business owners choose an MVL when they retire, restructure, or no longer need the company. The process offers peace of mind and can result in significant tax savings compared to other methods like company strike-off.
Why Choose an MVL Over Other Options?
An MVL is often the best way to close a solvent limited company because it is both controlled and tax-efficient. Through an MVL, the remaining value in the company is paid to shareholders as a capital distribution rather than income. This can lead to lower tax bills.
In many cases, shareholders qualify for Business Asset Disposal Relief (BADR), previously known as Entrepreneurs’ Relief. If eligible, they can pay just 10% in capital gains tax on the distributed funds, up to the £1 million lifetime limit. From April 2025, this rate will rise to 14% and then to 18% in April 2026, so acting sooner can be an advantage.
Using an MVL also provides legal clarity. By appointing a licensed insolvency practitioner, company directors avoid personal risk and ensure that the company’s closure is handled correctly from start to finish.
Understanding Solvency and the Declaration of Solvency
Before a company enters the MVL process, the directors must confirm that it is solvent. This means all creditors can be paid in full, with any interest, within 12 months. To prove this, a declaration of solvency must be signed. This legal document outlines the company’s current assets and debts. It must be signed by most directors in front of a solicitor or notary public.
It is vital that this declaration is accurate. Making a false declaration, especially if the company turns out to be insolvent, is a serious offence and can result in legal penalties. That is why it is important to work with a licensed insolvency practitioner before starting the MVL liquidation.
The MVL Process
The MVL process follows a set path, with a focus on legal compliance and financial transparency.
First, the directors prepare and sign the declaration of solvency. This must happen no more than five weeks before a shareholder meeting is held.
At the meeting, at least 75% (by value) of the shareholders must agree to the MVL for the process to move forward. Once the resolution is passed, a licensed insolvency practitioner is appointed to manage the liquidation.
The company must then advertise in The Gazette within 14 days of the resolution. This gives creditors a chance to come forward if they are owed money. The declaration of solvency is also sent to Companies House so the liquidation is officially recorded.
The insolvency practitioner then manages the company’s closure, including:
- Selling company assets
- Settling any outstanding creditor claims
- Distributing the remaining funds to shareholders
Once all debts are paid and HMRC gives tax clearance, the company is formally dissolved. It is then removed from the register at Companies House.
Tax Advantages of an MVL
One of the main benefits of a members’ voluntary liquidation is how tax is applied. When a company’s value is paid out through an MVL, it is treated as capital rather than income. This often means a much lower tax bill for shareholders.
For those who qualify for Business Asset Disposal Relief, capital gains tax is currently just 10%, which is a big difference compared to income tax rates. However, BADR is changing. The rate will rise to 14% in April 2025 and again to 18% in April 2026. Acting before these changes can make a significant difference.
It is also important to consider the Tax Targeted Anti-Avoidance Rule (TAAR). This rule prevents individuals from closing a company through an MVL just to avoid tax and then setting up a similar business soon after. If this happens, HMRC may treat the capital as income and apply a higher tax rate. We help clients understand these risks and plan carefully to avoid triggering TAAR.
MVL vs Strike Off vs CVL
When thinking about closing a company, it is useful to compare your options.
- MVL: Suits companies with more than £25,000 in retained earnings or assets. It is formal, thorough, and often better for tax purposes.
- Voluntary Strike-Off: Quicker and cheaper, but only applies to companies with no assets or liabilities. If there is more than £25,000 to distribute, extra tax could remove any savings.
- Creditors’ Voluntary Liquidation (CVL): For insolvent companies that cannot repay debts. It protects creditors but offers no return to shareholders. Unlike an MVL, a CVL is focused on clearing debts rather than returning value.
If you are unsure which route fits your company best, our team can assess your situation.
How Long Does an MVL Take?
The full MVL process often takes between three months and a year, depending on how complex the company’s finances are. However, distributions to shareholders can usually begin about 21 days after the resolution is passed, once the required notice period for creditors ends.
A key factor in the timing is how quickly HMRC grants tax clearance. If all tax returns are up to date and liabilities are settled before the MVL begins, the process tends to move faster. We help our clients prepare properly to avoid delays by gathering documents early, paying off debts in advance, and preparing HMRC filings ahead of time.
Role of the Licensed Insolvency Practitioner
A licensed insolvency practitioner is essential to the MVL liquidation. Their role is to oversee the closure of the company and make sure all legal steps are followed.
At Campbell Crossley & Davis, we act as your insolvency practitioner and manage the entire MVL process. We take care of communicating with HMRC and Companies House, arranging asset sales, handling distributions, and confirming when the company can be removed from the register.
Our goal is to make the experience straightforward and stress-free, giving you peace of mind as your company is closed correctly and efficiently.
When Should You Use an MVL?
An MVL is commonly used in the following situations:
- You are retiring and no one is taking over the company
- A group of companies is simplifying its structure
- Your business has completed its purpose or contract
- The company is dormant or no longer active
- You want to unlock value from a company without heavy tax costs
If your company is solvent and has more than £25,000 in assets, the MVL process could be the most suitable route.
Final Steps and Company Dissolution
Once the liquidation is complete, and HMRC has confirmed that all tax matters are settled, the insolvency practitioner files final documents at Companies House. A final notice is placed in The Gazette to confirm the process has ended.
After this, the company is officially dissolved and removed from the register. At this point, it no longer exists as a legal entity.
Because the MVL is a formal liquidation, the chances of the company being reinstated later are extremely low. This gives directors and shareholders confidence that the matter is fully closed.
Work With Campbell Crossley & Davis
We understand that closing a company can feel complex, especially if you want to make sure everything is done correctly and efficiently. At Campbell Crossley & Davis, we help business owners and directors navigate the MVL process from start to finish.
Our licensed insolvency practitioners provide expert support to ensure that your solvent company is liquidated in a way that is legal, clear, and tax-efficient. We take care of all paperwork, filings, and communications, leaving you to focus on what comes next.
Whether you are planning to retire, restructure, or release company assets, we are here to help you do it with confidence.
If you would like to know how the process works and the information we would need from you to get started, have a read of our guide to members’ voluntary liquidations.
We know you expect to receive money quickly and we will do our upmost to achieve this, depending on circumstances. We also believe our prices are competitive. For a fixed price quote please contact a member of our team on 01253 349331.
This note is meant as a brief overview of Members’ Voluntary Liquidations. It is not a detailed review and further detailed advice should be taken before coming to any decision. No responsibility can be accepted by Campbell Crossley and Davis, its partners or employees for any loss occasioned by any person or persons acting or refraining from action as a result of material contained in this note.
