Company Voluntary Liquidation

Company Voluntary Liquidation (MVL)

A Members Voluntary Liquidation (MVL) is a process used by solvent companies to close down operations while ensuring all debts are repaid. In contrast, a Creditors Voluntary Liquidation (CVL) applies to insolvent companies that cannot repay their debts. Both processes are governed by the Companies Act 2006 and involve strict timelines and procedures.

When is an MVL Appropriate?

An MVL is suitable if the company directors agree that:

• The company is solvent.
• Debts can be fully repaid within 12 months.

The process involves:

1. A Statutory Declaration of Solvency by the directors, including details of the company’s assets and liabilities.
2. A General Meeting where members pass a resolution to wind up the company.
3. Notifications to:
   • The Gazette (within 14 days of the meeting).
   • The Registrar at Companies House (within 15 days of the meeting).

When is a CVL More Appropriate?

A CVL is used when the company cannot pay its debts. The process is similar to an MVL but with additional requirements:

1. Directors must pass a Special Resolution stating that the company can no longer trade.
2. Within 14 days, the resolution must be:
   • Published in The Gazette.
   • Sent to the Registrar.
3. Creditors’ Meeting: Held within 14 days of the resolution, with at least 7 days’ notice to creditors. This must be advertised in:
   • The Gazette.
   • Two local newspapers.

Can an MVL Convert to a CVL?

Yes. If the liquidator finds that the company cannot repay its debts, the MVL will convert to a CVL:

• A Creditors’ Meeting is held within 28 days.
• Creditors are given 7 days’ notice, and the meeting is advertised in The Gazette and local newspapers.
• The liquidator must file a statement of affairs with the Registrar within 5 days of the meeting.

Role of Liquidators in MVL and CVL

Liquidators manage the winding-up process by:

• Collecting and selling company assets.
• Distributing funds to creditors.
• Distributing surplus assets to members (if applicable).

Key responsibilities include:

• Notifications: Announcements of their appointment are published in The Gazette within 14 days and filed with the Registrar.
• Reporting:
  • Initial Statement of Affairs within 5 days of the creditors’ meeting.
  • Annual progress reports to Companies House every 12 months.
  • Final progress report after winding up is complete.

If a liquidator changes, they must issue a progress report at the time of the change or annually after the first year.

Final Steps After Winding-Up

1. The liquidator holds a Final Meeting of creditors and members, advertised at least a month in advance.
2. A Final Progress Report is sent to the Registrar within one week of the meeting.
3. The company is dissolved within three months unless a court order specifies otherwise.

Recent Legislation and Updates

• Companies Act 2006: Governs the procedures for voluntary liquidation.
• Insolvency Rules (England and Wales) 2016: Provides detailed rules for conducting MVLs and CVLs, including reporting requirements.
• Corporate Insolvency and Governance Act 2020: Introduced temporary measures to support businesses during financial difficulties, impacting liquidation timelines in some cases.

Useful Links for Further Reading

• Insolvency Service: Liquidation Explained A practical guide to liquidation, including MVLs and CVLs, outlining responsibilities for directors, creditors, and liquidators.
• Companies House: Filing Requirements for Liquidators Details the specific reporting obligations for liquidators during the liquidation process.
• Companies Act 2006 The core legislation outlining the rules for company operations, including voluntary liquidation procedures.

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