Yes. An MVL (Members Voluntary Liquidation) used to take so long in most cases because the Liquidator was waiting for clearance from HMRC. Now it could be because the burden has flipped to the Liquidator to satisfy themselves of the tax position given HMRC has ceased to provide tax clearance.
In order to distribute in many instances the Liquidator used to want clearance from HMRC for Corporation Tax purposes and any other taxes that the company was a party such as VAT and PAYE.
Without such clearance, if HMRC came along and says that there is a liability and the Liquidator has distributed all the assets to the shareholders, then the Liquidator would have had to reclaim those assets. If the assets could not be reclaimed for any reason or the shareholders will not repay them to the company then the Liquidator is potentially personally liable for the same.
Now that HMRC clearance is no longer provided the Liquidator may want to do their own review to ensure that there is no tax liability to HMRC. This could mean a MVL could take a long time if the company records are not well organised to show that there is no such liability.
There was a way around the problem to speed up the distribution to the shareholders by the Liquidator. That is for the shareholders to provide an indemnity to the Liquidator for any liability for which the Liquidator would be personally liable resulting from the Liquidation.
However, the Liquidator’s acceptance of that is at his or her discretion. It is down to the Liquidator if they feel comfortable because although an indemnity is a legally binding agreement it is not the same as cash in the bank. If for any reason a Liquidator who called upon an indemnity was unable to recover company assets distributed to the shareholders the Liquidator is still potentially personally liable to the company and its creditors who have lost out as a result of an early distribution.
A Members Voluntary Liquidation distribution does not have to take a long time necessarily.
The Liquidator is not obliged to set aside a fund to meet those contingent claims in full and that the claims of the contingent creditors fall to be satisfied through the valuation of their claims under what is now IR 4.86. The matter is put clearly in a passage in the judgment of Hoffmann LJ in Re Forte’s (Manufacturing) Ltd [1994] BCC 84 at p. 89 which was referred to in the case of Ricoh Europe Holdings BV & Ors v Spratt & Anor [2013] EWCA Civ 92:
A company is certainly entitled to initiate and complete the process of winding up notwithstanding that it will thereby become unable to fulfil future or contingent obligations. Contingent creditors become entitled to prove for the value of their claims at the date of winding up, but the company cannot be required to set aside a fund against the possibility that the contingency may happen. The liquidator is entitled to distribute the assets in accordance with the rules and such distributions cannot afterwards be disturbed. Re House Property and Investment Co Ltd, in which a landlord tried unsuccessfully to require the liquidator of its original tenant company to set aside a fund to pay the rent if the assignee should default, illustrates all these principles very well.
On the other hand, it is also a rule of winding up that a creditor may submit a proof or amend an existing proof at any time during the liquidation. The rule that prior distributions cannot be disturbed means that it may not do him much good, but in principle he is entitled to make his claim. Another principle of liquidation is that contingent claims are valued in the light of subsequent events, so that a proof may be increased because the contingency has happened: see Macfarlane’s Claim (1880) 17 ChD 337 . Furthermore, it is possible that a creditor may be entitled to prove for an accrued debt when the contingency has occurred after the winding up. I express no opinion on this point, but whatever the form of the proof, there is no principle which excludes new or increased claims.
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