Members Voluntary Liquidation (MVL)

A Members Voluntary Liquidation (MVL) is a type of liquidation that is used by solvent companies to wind down their affairs and cease trading. In an MVL, the company’s assets are sold off to pay off creditors, and any remaining funds are distributed to the company’s shareholders or “members”.

Solvent means that the company has sufficient assets to cover its debts and all parties get paid in full, with any remaining funds distributed to members.

This should not to be confused with a Creditors’ Voluntary Liquidation (CVL) which is for insolvent companies. In a CVL, normally creditors can expect to see only some some, if any, of the proceeds of the liquidation.

Why would a company choose to go into Members Voluntary Liquidation?

There are a number of reasons why a company might choose to go into MVL. These include:

  • The company’s owners may decide to retire or sell the business.
  • The company may be facing financial difficulties and may not be able to continue trading.
  • The company may have been acquired by another company and is no longer needed.

How does Members Voluntary Liquidation work?

The process of MVL is as follows:

  1. The company’s directors must pass a resolution to wind up the company.
  2. The company appoints a liquidator.
  3. The liquidator takes over the management of the company and sells off assets to pay creditors.
  4. Any remaining funds are distributed to company members.

What are the benefits of Members Voluntary Liquidation?

There are a number of benefits to MVL, including:

  • It is a relatively quick and easy process.
  • It can be used by solvent companies.
  • It allows the company’s owners to retain control of the winding down process.
  • It provides certainty for creditors and stakeholders.

Considerations to keep in mind about a MVL:

  • The company’s directors must act in the best interests of the company and its creditors when they are considering MVL.
  • The liquidator must be a licensed insolvency practitioner.
  • The company’s creditors must be given notice of the liquidation.
  • The company’s assets must be sold in a fair and orderly manner.
  • The company’s members must be paid in accordance with their rights.

MVL can be a complex process, but it can be a helpful way for solvent companies to wind down their affairs and cease trading. If you are considering MVL for your company, it is important to speak to an insolvency practitioner to discuss the pros and cons of this type of liquidation.