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An MVL, or Members’ Voluntary Liquidation, is an official process for closing down a solvent limited company and extracting the profits within it.
There are various reasons why a company might be closed down in this way – sometimes a business has simply reached the end of its useful life, whilst in other instances the directors may wish to retire or move onto a new venture.
MVL can be a tax-efficient and cost-effective way to extract profits from a limited company prior to it being wound down. Distributions taken via an MVL are taxed as capital gains rather than income, and members may also be able to claim Business Asset Disposal Relief (previously known as Entrepreneurs’ Relief), which brings the effective rate of CGT payable down to just 10%.
So what is the timeline and process for a Members’ Voluntary Liquidation?
MVLs are changing in April
Did you know that MVLs are changing? From April 2025, the rate of tax payable on funds extracted from a company following an MVL are increasing. Disposals that qualify for Business Asset Disposal Relief (BADR) are currently taxed at 10%. This will increase to 14% in April 2025. There is still time to get your MVL started before this deadline. To take advantage of the 10% rate of BADR, give a member of our team a call on 0808 253 5556, or email [email protected]
The basic timeline of a Members’ Voluntary Liquidation is as follows:
So let’s look at the timeline of a Members' Voluntary Liquidation in a little more detail.
As a Members' Voluntary Liquidation is classed as a formal process, a licensed insolvency practitioner is needed to administer the process on behalf of the company's directors and shareholders. For a company considering an MVL, its directors and members will typically seek advice and guidance from an insolvency practitioner at an early stage to ascertain whether an MVL is right for their company. If so, the insolvency practitioner will be formally appointed to oversee and administer the liquidation and closure of the business.
Directors must sign a Declaration of Solvency before the liquidation process can go ahead. This effectively states that the company is in a position to repay all its debts, including contingent liabilities, within 12 months of the date of the declaration.
Contingent liabilities are payments that might need to be made, but that aren’t definite – a pending claim by a customer for a faulty product is an example of a contingent liability, as is an ongoing claim for unfair dismissal by an employee.
It’s crucial to be certain that the company can repay all its creditors in this timeframe, and to ensure all creditors are informed of the company’s planned closure, as any unexpected claims could tip the business into an insolvent position.
Falsely swearing a declaration of solvency is considered an act of perjury, so shareholders must be sure when it comes to the solvency of their company before going ahead with the MVL.
A resolution to wind up the company via Members’ Voluntary Liquidation must be passed within five weeks of the Declaration of Solvency. Company shareholders cast their votes and if 75% of members vote in favour of placing the company into an MVL, the process can begin.
The Gazette is the official public record in the UK, and within 14 days’ of the resolution being made, an advert must be placed to announce the impending closure of the company. This alerts creditors to the members’ intentions, and enables claims to be made for an outstanding debts owed by the company. The liquidator must also officially inform all known creditors of the proposed liquidation within 28 days of the resolution.
As part of the liquidation, all company assets are sold by the liquidator, - unless these are being distributed in specie - any creditors fully repaid, with the remaining funds being distributed to members.
As we mentioned earlier, MVL can be a tax-efficient process as it allows for Business Asset Disposal Relief to be claimed by eligible individuals. Distributions are treated as capital gains rather than income for tax purposes, and Business Asset Disposal Relief can further reduce the effective rate of tax payable on these gains.
Start your online liquidation today
If you have decided liquidation is the right option for your limited company, you can take the first step and begin the process online using our online portal. Starting the process is quick, simple, and can be done at a time that suits you. Your information will be submitted to your local UK Liquidators insolvency practitioner who will be with you every step of the way. Click here to start your company’s liquidation online.
When the liquidator has filed final documents with Companies House and the liquidation procedure is complete, another notice is placed in the Gazette. The company is then removed from the Register of Companies at Companies House, and ceases to exist as a legal entity.
The full timeline for a Members’ Voluntary Liquidation from start to completion is typically between six months and a year, but this depends on the complexity of the business. While an MVL may take several months to complete, shareholders often see their distributions paid at an early stage of the liquidation process, particularly if the company's affairs are straight-forward.
For more information on the timeline and process of an MVL, please contact our team of licensed insolvency practitioners at UK Liquidators – we operate a wide network of UK offices.
If you are considering liquidation for your limited company, taking advice from a licensed insolvency practitioner can help you understand your options.
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If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.
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