What Is Solvent Liquidation?

Solvent liquidation is also known as Members Voluntary Liquidation or MVL. While other liquidation processes take place because a company is unable to meet its financial obligations through insolvency, this does not.

If the directors and shareholders agree to wind up a company they can do so. There are a couple of reasons why this might happen rather than selling the business to another party. The first is if the owner is retiring and there is no one to take over. The second would be if the business now has no purpose to exist.

There can be certain tax benefits to winding up a company this way, depending on the circumstances. There is also no need for an investigation as to why the business failed, as happens in insolvency liquidations.

To proceed, the company needs to have agreement with the shareholders and bring in a licensed insolvency practitioner to act for them.

  • The directors will then sign a declaration stating that the company is solvent. The liquidator will investigate to make sure this is true. If not, they will have the right to sell assets from the company to pay back creditors.
  • The liquidator will be appointed at an Extraordinary General Meeting and a notice of the liquidation must be published in The Gazette and the details sent to Companies House.
  • The liquidation procedure is completed when the assets are distributed to shareholders and the company removed from the register.

If you are considering a solvent liquidation for your company, you need to employ the services of a licensed insolvency practitioner.

Contact us today to find out how liquidation.co.uk can help. 

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