Members Voluntary Liquidation (MVL) is the process used to close a solvent company. The company cannot be simply Struck Off. This is because it may still be trading. In addition it has assets which must be used to repay any debt that it owes.
- Find out how Members Voluntary Liquidation Works
- What happens to company debt in an MVL?
- Can a company trade during a MVL?
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How does Members Voluntary Liquidation work?
The directors and shareholders of solvent company decide that they want to close the business. They then appoint a Liquidator who will ensure the process is undertaken correctly.
The duties of the Liquidator include collecting any debts owed to the company. They must also sell the assets for a sensible market price and ensure that anyone who is owed money is paid in full. The Liquidator will then share out any remaining cash or assets to the shareholders.
Depending on the size of the company a Member’s Voluntary Liquidation will normally have been planned for a number of months. This means that suppliers, customers and employees will have significant warning of the closure.
What happens to the company’s debts after MVL?
If a company is closed using Member’s Voluntary Liquidation all of its debts must be paid in full. If the company is unable to repay everything that it owes it is insolvent. In these circumstances a Creditors Voluntary Liquidation is required to close it.
Repayment of the company’s debts does not have to happen immediately. There must be sufficient assets to be able to repay everything within 12 months. The Directors have to confirm that this is the case before the process can begin.
Once a Liquidator is appointed they must undertake a review of the company’s financial position. If having done this they believe it is insolvent they must hold a Creditors Meeting. The process then turns into a Creditors Voluntary Liquidation.
Can a company trade during Members Voluntary Liquidation?
Once a Liquidator is appointed the company is obliged to stop trading. No new contracts can be taken on. The Liquidator will then want to stop any further operations as quickly as possible.
The Liquidator may chose to keep the business running for a short period to enable any work in progress to be completed. However the expectation is that this will be completed and paid for within 12 months.