How Long Has A Liquidator Got To Pay The Debts In A Members Voluntary Liquidation?

How long has a liquidator got to pay the debts in a members voluntary liquidation? A liquidator has 12 months to pay the debts in a members voluntary liquidation and not a nanosecond longer. Section 95 of the Insolvency Act 1986 sets out the 12 month timescale and Section 96 of the Insolvency Act 1986 highlights the effect of a consequential conversion into a creditors voluntary liquidation if the company cannot do this. A members voluntary liquidation, although only applicable for solvent companies, is not available as a type of liquidation for companies that are only balance sheet solvent.

The case of NOAL SCSP & Ors v Novalpina Capital LLP & Ors [2025] EWHC 1392 (Ch) (“NOAL”) highlighted the point.

NOAL illuminated that a members voluntary liquidation (“MVL”) is in effect a cash flow based solvent liquidation. You can sprinkle into the argument that you are balance sheet solvent until you are blue in the face but if you cannot pay creditors in full with statutory interest within 12 months, you cannot avoid creditors voluntary liquidation (“CVL”).

The judge said this is not a balance sheet insolvency test; it is a test of:

… even with a relatively modest debt, then the company will need to be converted into a CVL.

Why Is Balance Sheet Solvency Irrelevant In A Members Voluntary Liquidation?

Balance sheet solvency is irrelevant because the test set out in Section 95(1) of the Insolvency Act 1986 refers to a period of being able to pay the debts within 12 months.

If a company is balance sheet solvent but unable to pay the creditors’ debts in full with statutory interest within 12 months, then it has to go into CVL.

In NOAL, the judge said:

In my judgment, it is apparent that the statutory declaration is not a reference to either the cash flow insolvency test or to the balance sheet insolvency test. A company can be balance sheet solvent but unable to pay its debts as or when they fall due and in particular be unable to pay its debts in full within a period not exceeding 12 months. If a company needs to realise a significant asset in order to pay its debts in full and there is considerable uncertainty as to how long it will take to realise the asset, then, in my judgment, that company is unable to go into a MVL. That is because the members will be unable to swear in the declaration that the debts will be paid in the 12-month period

…

The intention was not to create a type of liquidation for companies who are balance sheet solvent. The legislative intention behind section 89 IA 86 is to create an alternative type of liquidation for those companies who are able to pay their debts within a specified period not exceeding 12 months.

What If A Company Might Be Unable To Pay In 12 Months?

If a company might be unable to pay creditors in full with statutory interest within 12 months, then it has to go into CVL. 

In NOAL, the judge said:

Equally, a company may be able to pay its debts as and when they fall due, but be potentially unable to pay all its debts in full in the relevant 12-month period. This may be the case in relation to contingent or prospective claims which may not fall due for a period of time. The test set out in section 89 is therefore a specific test which may have some similarities to the cash flow test, but actually asks a different question relating to whether the company will be able to pay its debts in full with interest thereon in the relevant period not exceeding 12 months. It does not ask if the company is able to provide for the payment of those debts in the 12-month period.

Can An MVL Last For More Than 12 Months?

An MVL can last for more than 12 months but only if the creditors have been paid in full with statutory interest. 

In NOAL, the judge said:

In my judgment, it is clear that a MVL can last for more than 12 months, providing the debts and the interest thereon have been paid in full within the 12-month period.