Knowledge centre

Knowledge Centre

Answers to all the questions you have around general liquidation, insolvent liquidation and solvent liquidation FAQs, as well as handy downloadable guides designed to give you peace of mind.

Solvent liquidation FAQs

How do I know if my company is solvent?

There are two solvency tests that can be applied to assess a company’s financial viability.

1. The cash-flow test

Carry out an in-depth audit of your cash flow. Simply put, this involves listing out the different types of income that your business has and then listing the expenses. If you can pay staff, suppliers, HMRC, creditors, etc. on time and in full in the long-term then your business is solvent.
For help creating your cash-flow forecast, download our guide.

2. The balance-sheet test

The balance-sheet test weighs your assets against your liabilities. Calculate all your assets (stock, premises, equipment, monies owed, cash in the bank) against your liabilities (debts to suppliers, your bank or other creditors).
It’s important that you don’t underestimate or overestimate your assets and liabilities. You need a true picture of your company’s position to decide on the best course of action.
Appointing an licensed insolvency practitioner might be a good idea at this stage, so they can help you decide on the best solution. If you’re ready to start this process, contact us .

What is solvent liquidation?

Solvent liquidation is also known as Members’ Voluntary Liquidation or MVL. While other liquidation processes take place because a company cannot meet its financial obligations through insolvency, this does not. The common reasons for a solvent liquidation are if the owner is retiring and there is no one to take over. The business now has no purpose to exist. Or if a contractor is ‘winding up’ their company to take a full-time role. There can be tax benefits to ‘winding up’ a company this way, depending on the circumstances. To discuss your solvent liquidation, contact us .

What’s a voluntary strike-off?

A voluntary strike-off is essentially the removal of your limited company from the Companies House register. To qualify for a voluntary strike-off your company cannot have traded in the previous three months, changed its name or been subject to a formal insolvency procedure. You can find more details on the criteria here.
It’s important to note that once your company has been struck off, all its assets become the property of the Crown. So it’s vital that you make sure all your finances are in order and assets distributed before you dissolve your company. If you attempt to strike-off an insolvent company the creditors are able to request that the company is put back on the register and potentially into liquidation. Therefore, you must seek the correct advice.

What is a Members’ Voluntary Liquidation (MVL)?

Members’ Voluntary Liquidation or MVL is a way to close a solvent company. It is a formal, legal process used when there are no debt liabilities but the directors and shareholders want to ‘wind up’ the company. You can learn more about MVL on our solvent liquidation page.

Scroll to Top