What Is Members’ Voluntary Liquidation and How Could It Help My Company?

If you are the director of your company that is insolvent or facing insolvency, you may need help and advice for corporate insolvency from experts. This means that your company cannot pay its debts when they are due. If your company is insolvent, you, as the director, have a number of options available to you, and one of these may be members’ voluntary liquidation (MVL).

What Is members’ Voluntary Liquidation (MVL)?

MVL is one way to wind up an insolvent company where the directors believe there is no chance of the company avoiding insolvency and that it can pay its creditors in full within 12 months. The directors must decide to place the company into MVL and provide a declaration of solvency to demonstrate that they believe the company will be able to pay its creditors.

In this process, you need to appoint a licensed insolvency practitioner (IP) as the liquidator, such as this London insolvency agency. Their main job is to realize the company’s assets, pay off the debts owed to creditors, and distribute surplus money to the shareholders.

Once MVL has been completed, the company will be dissolved and removed from the list of registered businesses.

How Could MVL Help My Company?

MVL can be a way of allowing your company to close down in an orderly manner and pay its creditors in full. This is often preferable to having your company wound up by a court order where there could be uncertainty about how much would ultimately be paid to creditors.

MVL can also help preserve the value of your company’s assets as the liquidator will sell them rather than being seized them by creditors. This could allow you to buy back your company’s assets and start a new business.

MVL can be a good option if you face personal insolvency as it can allow you to pay off your creditors and avoid having your personal assets seized. Then the remaining funds will be distributed to shareholders. See here for an estimate of creditor’s voluntary liquidation CVL.

However, MVL is not suitable for every company, and you should seek professional advice to ensure that it is the best option for your particular circumstances.

Risks of MVL

There are several risks associated with MVL that you need to be aware of:

  • It can be complex and time-consuming, so you must get professional help.
  • You could still be held liable for the debts of the company if it is found that you have traded recklessly or fraudulently.
  • The value of your company’s assets may be reduced if the liquidator sells them.
  • You may not be able to buy back your company’s assets as they may be sold to third parties.

Other Alternatives to MVL

If you are facing insolvency, there are some other options available to you, such as:

  • Company voluntary arrangement (CVA): This is an agreement between your company and its creditors to repay its debts over a period of time.
  • Administration: This process can be used to rescue your company if it is insolvent. An administrator will be appointed to manage the company’s affairs and try to turn around its finances.
  • Liquidation: This is the process of winding up your company and selling its assets to pay off its debts. There are two liquidation types: compulsory and members’ voluntary.
  • Dissolution: This is closing down your company where it is no longer trading or active.

The Bottom Line

MVL can be a helpful way to deal with insolvency, but it is important to get professional advice to ensure that it is the best option for your particular circumstances. Ensure to hire licensed and experienced professionals to help you through the process.

Related posts