Solvent liquidations and dissolutions

A solvent liquidation, also known as a members voluntary liquidation (MVL), is used to close a solvent company and distribute assets to shareholders. This might follow retirement or a sale of the business.

An MVL is a formal process for winding up a solvent company where all debts are paid before surplus assets are distributed to shareholders.

In a solvent liquidation, the company can pay its debts in full, while an insolvent liquidation occurs when it cannot meet its obligations. In an MVL directors are obliged to sign a declaration of solvency to confirm their belief that debts will be paid in full.

There are various steps required of the directors and shareholders in order to wind up a company. An insolvency practioner can be instructed to guide stakeholders through this process.

Where there is no commercial benefit to undertaking an MVL, a simpler strike off approach can be taken. A dissolution consultant ensures compliance with HMRC and Companies House, manages paperwork, and supports directors through the closure process.

The process involves board approval, appointing a liquidator, notifying authorities, and distributing remaining assets to shareholders.

Tax efficiency is often a key reason for using the MVL process. In some circumstances retained profits can be distributed to shareholders as capital and in some circumstances shareholders can benefit from Business Asset Disposal Relief.

An MVL typically takes between three and six months, depending on asset realisation and creditor clearance.

A solvent liquidation ensures legal compliance, transparency and a formal process to deal with any unexpected claims which do arise against the company. An MVL can provide more tax-efficient outcomes in some circumstances compared to a simpler company strike off.

Professional advisors manage legal, financial, and tax aspects, ensuring compliance and efficient distribution of company assets.