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Understanding Members' Voluntary Liquidation

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The first thing that needs to be understood about Members Voluntary Liquidation (MVL) is that your company will need to be solvent. This means that the director and shareholders will be able to declare that they believe the company has assets, that when realised, will be sufficient to pay all outstanding debt. Understand that this is of vital importance under UK law.

An MVL begins with the Declaration of Solvency. The director (or directors) must swear within five weeks prior to the winding up resolution that embodies the company's assets and liabilities. As well, a statement must be sworn to that all creditors have been paid in full, or will be paid in full, within 12 months along with any interest due them. Once again, bear in mind the importance of complete honesty in this regard. It is a criminal offence to knowingly falsify this statement/declaration.

The next step of the Members Voluntary Liquidation procedure is to establish a resolution to wind up the company. This is done in an extraordinary meeting of shareholders/members giving 21 days' notice to pass the winding up resolution. The law stipulates that a meeting of creditors is not required.

Finally a liquidator will be appointed by what is known as an ordinary resolution which takes place immediately after the winding up resolution. The liquidator will be responsible to realise (sell/dispose of) assets and to settle with creditors, paying claims as well as statutory interest. If there is any surplus after realization, the liquidator will disperse it to members and chair a final meeting with them.

It should be noted that the liquidator, by law, should be a licensed Insolvency Practitioner who will not only handle liquidation but all communication with the courts, members and creditors. Once the liquidator is selected, the duties of the corporation are turned over to him/her throughout the Members Voluntary Liquidation process.

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