Insolvency Practitioners London U.K | Moorfields Corporate Recovery

Corporate Simplification

A Members’ Voluntary Liquidation (“MVL”) is a procedure which enables shareholders to wind up a solvent company and receive a distribution of surplus assets. The distribution of assets may be either through payment of a cash dividend or by what is known as a distribution in specie of its assets directly to its shareholders.

Although the procedure can only be used for solvent companies, the legislation is set out in the Insolvency Act 1986. Only Licensed Insolvency Practitioners can act liquidators in an MVL.

Some of the key advantages of an MVL include:

The ability to return capital to shareholders in a tax efficient way;
The ability to restructure a business and to distribute assets (including shares in subsidiaries) in specie;
Reduces risk, because all creditors must prove their debts in the liquidation;
Relieves management of ongoing compliance responsibilities allowing resources to be concentrated on core activities;

Moorfields has a dedicated solvent liquidation team with many years experience in the voluntary winding up of companies, both in the UK and overseas.

If you are interested in how Moorfields Corporate Recovery can assist you with the solvent liquidation of your company, or any other aspect of corporate restructuring services please call Simon Emery on 020 7186 1159 or email semery@moorfieldscr.com.

Brief Description of the Procedure

Brief Description of the Procedure

Once the directors of a company have concluded that their company should be wound-up by way of an MVL, all (or if there are more than two, a majority) of the directors must make a statutory declaration stating that they have made a full enquiry into the company’s affairs and have concluded that the company can pay its debts in full within a period not exceeding 12 months. This declaration, the Declaration of Solvency, must be made at a board meeting held in the five weeks before the date that the company is placed into MVL.

It should be noted that it is an offence to make a Declaration of Solvency without reasonable grounds for believing the company can repay its debts within the specified time. The penalty can be imprisonment, a fine, or both. When considering the solvency of the company it is essential that the directors consider any prospective or contingent liabilities of the company. If the directors do not have sufficient confidence that there are no unknown liabilities which the company would not be able to settle should a claim be received then they should not make the Declaration of Solvency and the company cannot be placed into MVL. In this case the company could still wound up, but it would have to be placed into Creditors’ Voluntary Liquidation.

At the board meeting the directors will resolve to propose to the shareholders, as a special resolution, that the company is wound up and that one or more Licensed Insolvency Practitioners are appointed as Liquidator(s) of the company. Depending on the needs of the proposed liquidation there may be other resolutions needed to provide for in specie distributions, costs of the liquidation, etc. We can advise and prepare any such resolutions that are needed.

The shareholder resolutions may be considered by the shareholders at a general meeting or as written resolutions. If a general meeting is called, 14 days notice will need to be given, unless a majority of the shareholders holding at least 90% in value of the share capital agree to hold the meeting on short notice.

The Liquidation commences when the shareholders pass the special resolution to wind up the company. From this point the powers of the directors cease (expect to the extent that the liquidator or the shareholders in general meeting approve) and the liquidator is responsible for the company’s assets.

Once he is appointed, the liquidator will use the assets of the company to pay any liabilities of the company and will distribute any surplus assets to the shareholders; as stated above, this could be by way of an in specie distribution. The liquidator will also deal with HMRC and confirm that the company has no further tax liabilities and that HMRC have no objection to the company being dissolved.

On completion of the liquidation the liquidator will call a final meeting of the company’s shareholders to report on the conduct of the liquidation. He will then file notice at Companies House that the liquidation has been completed and the company will be dissolved three months later.

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