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Liquidation is in essence the death of a company. A liquidator is appointed to act instead of the Directors to wind up the company’s affairs.


There are two common types of insolvent liquidation by virtue of Section 73 of the Insolvency Act 1986: Compulsory Liquidation or Creditors Voluntary Liquidation. Contact us for any advice as to how we may assist you with a liquidation matter.


A solvent liquidation is known as a Members Voluntary Liquidation.


Members Voluntary Liquidation

Creditors Voluntary Liquidation

Compulsory Liquidation


Members Voluntary Liquidation

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A Members Voluntary Liquidation (“MVL”) is a solvent liquidation when the creditors can anticipate and ought to obtain 100 pence in the £. An MVL can be undertaken entirely online.


A MVL is a procedure that is not strictly an insolvency procedure because the company is solvent and the creditors will be paid in full. It is a procedure that enables a business’ trade to be concluded and for a distribution to be provide to the shareholders or otherwise known as the members.


It is commonly undertaken for reasons of tax efficiency to obtain entrepreneurs relief for capital gains tax purposes.


The process looks  to obtain tax clearance from H M Revenue and Customs so that the Directors and Shareholders can be confident that there will be no claims remaining against the company.


The procedure will involve a resolution to wind up the company.

Statutory Declaration of Solvency to demonstrate ability to pay debts in full.

Appointment of a Liquidator to wind up the company.


The stages applicable to the MVL Procedure are set out in detail for you. Apply for an MVL.


How to prepare for MVL

In order to prepare for an MVL the following is required:

  • Statutory Declaration of Solvency based on an Estimated Statement of Affairs
  • Meeting of the Board of Directors to confirm the winding up
  • Members Resolution authorising the winding up and appointment of a liquidator


Creditors Voluntary Liquidation

A Creditors Voluntary Liquidation (“CVL”) is one in which the directors will typically approach an Insolvency Practitioner to wind up the company’s affairs without any involvement by the court.


A Creditors Voluntary Liquidation is initiated by a shareholders’ resolution. It involves the end of the insolvent company and the distribution of the company’s assets to the creditors. This procedure enables directors to avoid  unsecured limited company debts that are not personally guaranteed. That is subject to the provisions associated with Wrongful Trading which is why it is so important to get advice at the earliest opportunity.


A crucial defence to any claim for Wrongful Trading is that the Directors took every step with a view to minimising the potential loss to creditors. Directors need to be able to show what steps they took, how they took them and how those steps were of benefit to creditors. Taking professional advice and documenting what was done and the reason for it, will go a long way to being able later justify the position when it is being viewed with hindsight.


A creditors voluntary liquidation is by virtue of its name ‘voluntary’. There is no compulsion on a Director to deploy this procedure. However, many Directors consider it to be the right and responsible approach to be proactive for the overall benefit of the company and its creditors by ensuring that appropriate professional advice is taken. It will enable the processes of concluding the company’s activities are swiftly undertaken instead of waiting for creditors to take their own action themselves.


Directors may see voluntary liquidation as an appropriate exit from a stressful situation; whilst addressing all of the creditors, appropriately. If the limited company has liabilities that it cannot afford to pay and you would like to move on without the stress of the company’s debts hanging over your head, this type of procedure may be an appropriate option. Although it should be seen as a last resort, liquidating a company via this route can be considered a reasonable decision. Apply for a CVL online here.


How to prepare for CVL

In order to prepare for an CVL the following is required:

  • Estimated Statement of Affairs
  • Meeting of the Board of Directors to confirm the winding up
  • Members Resolution authorising the winding up and appointment of a liquidator
  • Creditors Resolution to consider the appointment of the Member’s liquidator


Compulsory Liquidation

A compulsory liquidation is when a court has issued a winding up order after a hearing of a winding up petition. Following which the Official Receiver is initially typically appointed as the Liquidator.


The Official Receiver is a government official who is employed by a government executive agency known as the Insolvency Service. Upon the making of a winding up order creditors can either leave matters with the OR to be the liquidator or alternatively attempt to appoint an Insolvency Practitioner (“IP”) to be the liquidator instead of the Official Receiver.


A Director whose company has gone into compuslory liquidation will have to attend on the Official Receiver and complete a very detailed questionnaire and narrative statement. This will assist in the understanding as to the reasons for the company’s demise.


There are two ways in which creditors can appoint an Insolvency Practitioner to be the Liquidator. If not less than 50% of creditors by value make a request of the OR then they can appoint an IP. Alternatively, creditors if they represent not less than 25% of creditors by value they can requisition a Decision Procedure to vote on the appointment of an IP to be the liquidator instead of the OR.




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