A Members Voluntary Liquidation (MVL) is a legal process through which a solvent company can wind up its affairs and distribute its assets among its shareholders.

Read our comprehensive guide to the process below.

Members Voluntary Liquidation

What is a Members Voluntary Liquidation (MVL)?

A Members Voluntary Liquidation (MVL) is a formal process for closing down a solvent company. It is initiated by the shareholders of the company. A solvent company is one that has more assets than liabilities, meaning that it can pay its debts.

Shareholders may want to initiate an MVL for a variety of reasons, such as to retire, sell the company, or because the company is no longer profitable. One of the main benefits of an MVL is that distributions to shareholders are taxed as capital gains rather than income tax. This can be a significant tax saving for shareholders.

The MVL process is carried out by a licensed insolvency practitioner appointed as the liquidator. The liquidator will sell the company’s assets and distribute the proceeds to the shareholders.

It is appropriate for companies with assets over £25,000.

What is a ‘Member’ in an MVL?

In the context of a Members’ Voluntary Liquidation (MVL), a member is a shareholder of the company being liquidated.

Why is an MVL used?

A Members Voluntary Liquidation is used for a variety of reasons, including:

  • To close down a solvent company: An MVL is a formal and orderly way to close down a solvent company. It is a more efficient and cost-effective way to do so than simply abandoning the company.
  • To extract profits from a company: An MVL can be used as a tax-efficient way to extract profits from a company. Distributions to shareholders from an MVL are taxed as capital gains rather than income tax. This can be a significant tax saving for shareholders.
  • To restructure a company: An MVL can be used as part of a company restructuring process. For example, a company may use an MVL to close down one part of its business and focus on another part.
  • To retire: Directors of a company may choose to initiate an MVL when they are ready to retire. This allows them to close down the company and distribute the proceeds to themselves.
  • To sell a company: A company may use an MVL to close down the company and sell its assets to another company. This can be a more efficient way to sell a company than trying to sell it as a whole.

Overall, an MVL is a flexible and efficient way to close down a solvent company or to restructure a company. It can also be used as a tax-efficient way to extract profits from a company.

Some MVL Examples

Here are some specific examples of how an MVL might be used:

  • A family-owned business may use an MVL to close down the business and distribute the proceeds to the family members.
  • A company that is no longer profitable may use an MVL to close down the business and minimize the losses of the shareholders.
  • A company that is merging with another company may use an MVL to close down one of the companies and transfer the assets to the other company.
  • A company that is changing its business model may use an MVL to close down the old business model and start fresh with the new one.

When is an MVL Not Appropriate

Here are some examples of when an MVL might not be appropriate:

  • The company has significant liabilities and cannot pay its debts.
  • The company is being investigated for fraud or other wrongdoing.
  • The company is subject to legal proceedings.
  • The company is involved in a complex commercial transaction.

Companies choosing members’ voluntary liquidation should be solvent:

  • able to pay all taxes
  • able to pay all creditors
  • able to meet all existing contractual obligations

How does an MVL work?

For shareholders who have accumulated substantial reserves within their company and find themselves no longer needing its ongoing existence, an MVL is a very useful tool.

The pathway to placing a company into an MVL is relatively straightforward. It hinges on obtaining the consent of at least 75% of the shareholders, measured in terms of their share value. Typically, this decision is advised by the company’s accountants, who possess the expertise to handle the final tax obligations.

One notable aspect to bear in mind is the timeline. Ideally, the MVL process should reach its conclusion with the dissolution of the company within a span of 12 months. This streamlined approach allows for the efficient distribution of assets, settlement of debts, and the ultimate closure of the company’s chapter, aligning with the shareholders’ objectives.

What is the Process for a Members’ Voluntary Liquidation (MVL)?

In a Members’ Voluntary Liquidation (MVL), the dissolution of a solvent company typically follows these steps:

Directors’ Resolution to Liquidate

The initiation of the MVL process begins with the company’s directors convening a board meeting. During this meeting, a resolution is passed to appoint a liquidator and set the wheels in motion for the company’s wind-up. Additionally, the directors determine the procedure for convening a shareholders’ meeting to secure approval for the impending liquidation.

Declaration of Solvency

Crucially, the directors formally affirm the company’s financial health by signing a declaration of solvency. This declaration attests that the company possesses the capacity to fully settle its debts. It is imperative to submit this declaration to Companies House within 14 days of its endorsement.

Shareholders’ Meeting

The next important juncture involves a gathering of the company’s shareholders. Their primary purpose is to cast their votes on the proposed liquidation. A special resolution, necessitating a majority consensus of 75%, is mandated to validate the liquidation decision. Moreover, the resolution must receive public notice through publication in the London Gazette.

Appointment of Liquidator

With shareholder approval secured, the company’s directors proceed to designate a licensed insolvency practitioner to assume the role of the liquidator. This expert will oversee the execution of the liquidation process.

Asset Realisation

The liquidator assumes the responsibility of realizing the company’s assets. This entails the sale of these assets and the diligent settlement of any outstanding liabilities.

Distribution to Shareholders

Following the completion of debt settlement, any remaining funds are equitably distributed among the shareholders. The distribution aligns with the respective proportions of their shareholdings.

Dissolution of the Company

Once all company assets have been divested, and all financial obligations have been met, the liquidator takes the final step by submitting an application to Companies House, seeking the official dissolution of the company.

In addition to these fundamental steps, several other formalities require attention during the MVL process. These include creditor notifications and the submission of various documents to Companies House. The guidance and expertise of the appointed liquidator prove invaluable in ensuring the compliance with all necessary requirements throughout this structured liquidation process.

How to speed up the MVL process

  • Prepare all necessary documentation in advance.
  • Be responsive to the liquidator’s requests.
  • Cooperate with the liquidator in selling the company’s assets.
  • Consider using a deed of indemnity.
  • Choose a liquidator with experience in MVLs.
  • Keep the liquidator informed of any changes to the company’s circumstances.
  • Be proactive in resolving any disputes.

How Long Does a Member’s Voluntary Liquidation Take?

The actual liquidation time will vary depending on the complexity of the company’s financial situation.

Our focus at Company Debt is on processing the MVL as fast as possible, and we do this partly by requesting our clients to sign what is called a deed of indemnity.’ This allows for the earliest possible release of funds, often within a week of the MVL’s completion.

The remaining balance depends on how long it takes HMRC to finish their side of the case.

If you’d like a case-specific timeline, call us at your convenience. With the details of your case in hand, we’ll be able to advise fairly accurately how long this might take.

What are the Costs of a Members Voluntary Liquidation?

The costs of a Members Voluntary Liquidation (MVL) can vary significantly depending on the size, complexity, and circumstances of the company being liquidated. However, as a general guide, you should expect to pay at least £4,000 for the liquidator’s fee, plus disbursements such as Gazette advertising (typically around £60).

Other costs that may be incurred include legal fees, accounting fees, and expenses related to the sale of the company’s assets and settlement of its liabilities. The total costs of an MVL can, therefore, vary widely, but it is important to get an estimate from a licensed insolvency practitioner before proceeding.

The Tax Implications for Directors in a Members’ Voluntary Liquidation

MVLs come with significant tax benefits.

It’s possible to save money with an MVL by paying only 10% capital gains rather than the normal CGT rate of 20% (or 28% if the gains relate to residential property)

In fact, these gains are even more substantial if you consider the alternatives of extracting the profits as dividends up to 38.1%) or salary (up to 45%).

This was known as Entrepreneurs Relief (before 6 April 2020) and is now called Business Asset Disposal Relief[1]Trusted Source – Legislation – Finance Act 2020, Schedule 3, Entrepreneurs Relief.

What are the criteria for Business Asset Disposal Relief in an MVL?

To qualify for BADR, the director must have held the shares for at least two years and must have at least 5% of the company’s shares and voting rights.

Ownership and Trading PeriodThe shareholder must have owned the shares for at least two years and the company must have been trading for at least two years.
ShareholdingThe shareholder must own at least 5% of the company’s ordinary share capital and voting rights.
Active ParticipationThe shareholder must be an officer or employee of the company or a group company or have been for a continuous period of at least two years.
Maximum ReliefThe maximum relief available is £1 million per individual over their lifetime.

A claim for Business Asset Disposal Relief, formerly Entrepreneurs’ Relief, must be submitted to HMRC within 2 years from the end of the tax year in which the sale or liquidation of the business occurs.

For example: for a sale which takes place in the 2021/22 tax year (which ended on 5th April 2022), any claim for Business Asset Disposal Relief on this disposal must be made to HMRC by 5th April 2024.

It’s important to note that the claim comes on the personal tax return of the individual who has made the capital gain.

Pros and Cons of an MVL

Pros of an MVL

  • Tax-efficient way to distribute profits to shareholders. Distributions to shareholders from an MVL are taxed as capital gains rather than income tax. This can be a significant tax saving for shareholders.
  • Control over the liquidation process. The directors of the company appoint the liquidator and have a say in how the liquidation is carried out.
  • Flexibility. An MVL can be used to liquidate a company of any size or complexity.
  • Relatively quick process. An MVL can be completed in as little as a few months, depending on the size and complexity of the company.

Cons of an MVL

  • Costs. The costs of an MVL can be significant, depending on the size and complexity of the company.
  • Complexity. The MVL process can be complex and time-consuming.
  • Loss of control. Once the liquidation process has begun, the liquidator has control over the company’s assets and affairs.
  • Potential for disputes. Disputes can arise between the company, its creditors, and its shareholders during the MVL process.

Can you do a Members’ Voluntary Liquidation (MVL) yourself?

No, you cannot do an MVL yourself. You must appoint a licensed insolvency practitioner (IP) to act as the liquidator. The IP will be responsible for carrying out the liquidation process in accordance with the law and regulations.


The choice between a Members’ Voluntary Liquidation (MVL) and a Creditors’ Voluntary Liquidation (CVL) depends on the financial circumstances of the company:

MVL (Members’ Voluntary Liquidation):

  • MVL is suitable for financially solvent companies. It is typically chosen when a company has surplus assets and funds that need to be distributed among shareholders because it’s no longer needed for its current purposes.
  • MVL requires the approval of shareholders, with a 75% majority vote in value. It’s initiated when shareholders decide to wind up the company voluntarily.
  • MVL can be more tax-efficient for shareholders in certain cases, as they may be eligible for capital gains tax rates, which can be lower than income tax rates.

CVL (Creditors’ Voluntary Liquidation):

  • CVL is suitable for financially distressed companies that are unable to meet their financial obligations. It’s initiated when the directors believe the company is insolvent and cannot continue trading.
  • In CVL, the company’s creditors play a significant role in the process. A creditors’ meeting is held, and a licensed insolvency practitioner is appointed as the liquidator. Creditors’ claims are addressed during the liquidation process.
  • CVL is also used when a company needs to make its employees redundant due to financial difficulties. In such cases, the government’s Redundancy Payments Service may become involved.

In summary, MVL is for solvent companies looking to distribute assets among shareholders, while CVL is for insolvent companies facing financial difficulties and needing to wind up their affairs. The choice depends on the financial health and objectives of the company. It’s essential to seek professional advice to determine the most appropriate course of action.

Members Voluntary Liquidation FAQs

To be eligible for an MVL, a company must be solvent. In other words, it must be capable of settling all its debts within 12 months of initiating the liquidation process.

A straightforward MVL may take between three to six months to complete.

While advantageous in many respects, an MVL involves costs such as professional fees for the liquidator. Moreover, the process demands meticulous documentation and compliance with statutory obligations, which can be time-consuming.

The liquidator is responsible for winding up the company’s affairs. This includes selling assets, settling debts, and distributing the remaining funds to shareholders. The liquidator must also ensure that all statutory obligations are met, including final tax returns and deregistration of the company.

Unlike an MVL, a CVL is used when a company is insolvent and unable to pay its debts. In an MVL, the process is initiated by the directors and approved by shareholders, whereas in a CVL, creditors are more directly involved in the process.

Once the liquidation process has commenced, it is generally irreversible.

The termination of employment contracts is typically part of the liquidation process. Employees may be entitled to redundancy payments and should claim any owed wages or benefits from the liquidator.


The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.

You can learn more about our standards for producing accurate, unbiased content in our editorial policy here.

  1. Trusted Source – Legislation – Finance Act 2020, Schedule 3, Entrepreneurs Relief