What is a Members Voluntary Liquidation (MVL)?

A Members’ Voluntary Liquidation (MVL) is a shareholder-initiated liquidation procedure to close down a solvent company. It is appropriate for companies with assets over £25,000.

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.

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?

An MVL could potentially be the ideal solution for your company if it has realisable assets such as property, vehicles, or stock that could be liquidated into cash or has cash in the bank that you would like to extract. 

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

  • To close down a solvent company: If a company’s assets are valued at £25,000 or more, an MVL can be a more efficient and cost-effective way than simply dissolving the company.
  • To extract profits from a company: Distributions to shareholders from an MVL are taxed as capital gains rather than income tax, which can result in significant tax savings for shareholders.
  • To restructure a company: An MVL can be employed as part of a company restructuring process. For instance, a company may use an MVL to wind down one part of its business and focus on another part.
  • 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 approach to selling a company than trying to sell it as a whole.
Members Voluntary Liquidation

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 supported by professional advice from the company’s accountants, or from an insolvency practitioner such as ourselves. Although an MVL is not an insolvency process, it does require the services of an IP to act as a liquidator.

One notable aspect to bear in mind is the timeline. Ideally, the MVL process should conclude with the company’s dissolution within 12 months. This 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:

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.

Crucially, the directors formally confirm 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.

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.

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.

The liquidator assumes the responsibility of realising the company’s assets. This entails selling these assets and diligently settling any outstanding liabilities.

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.

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.

Several other formalities require attention during the MVL process. These include creditor notifications and the submission of various documents to Companies House. Your appointed IP will advise you on all of this.

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. We do this partly by requesting our clients to sign 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).

The Tax Benefits of 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.

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 two years of the end of the tax year in which the business is sold or liquidated.

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


  • A tax-efficient way to distribute profits to shareholders
  • Control over the liquidation process
  • An MVL can be used to liquidate a company of any size or complexity.
  • An MVL can be completed in as little as a few months.


  • The costs of an MVL can be significant.
  • The MVL process can be complex and time-consuming.
  • Once the liquidation process has begun, the liquidator has control over the company’s assets and affairs.
  • Disputes can arise between the company, its creditors, and its shareholders during the MVL process.

Can you Organise 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 company’s financial health and objectives. 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.