What is a Members’ Voluntary Liquidation?

Donald McNaught

Donald McNaught

Restructuring Partner

A members’ voluntary liquidation (MVL) is a voluntary liquidation process by a solvent company allowing the shareholders to obtain the value of the business in cash and instead of being charged income tax on the funds a capital gains tax is applied, meaning a significant saving on taxes.

How does an MVL work in practice?

An MVL needs a licensed insolvency practitioner to be the liquidator. The term “members” means “shareholders” so it is a liquidation driven by the owners of the shares. Usually the proposed liquidator will prepare all the statutory paperwork and meet or discuss the process with the director/shareholders. 

Key consideration for an MVL

The important issues for directors to consider for an MVL are:

  • Getting an accurate up to date balance sheet showing all the assets and liabilities. This is needed for the declaration of solvency.
  • Having available all the names and addresses for shareholders (the members).
  • It is advisable to have the company in as simple a form as possible. This means having collected in all the assets and sold them and paying out creditors (suppliers) where possible.
  • Often the only creditor outstanding at the start of the liquidation is HMRC for corporation tax and/or VAT, which the liquidator will settle once in funds.
  • An MVL should only be used where all creditors have been paid in full or will be paid in full within 12 months from the date of liquidation.

How can I find out more about MVLs?

If you are considering closing down your limited company and would like to find out if an MVL is the right route for you, a member of our dedicated ContractorMVLs team can help. Visit our ContractorMVL page for more information and try our MVL calculator to assess your potential tax saving.