Members Voluntary Liquidation Procedure

Our team has put together the infographic below, which details the 4 key elements of a Members Voluntary Liquidation – also known as a solvent liquidation. They are: 1. Key initial matters for consideration; 2. The process of placing the company in liquidation; 3. What happens once the company is in liquidation; 4. The closure of the liquidation.

Please take a look at some of our testimonials from our clients for just some of the successful members voluntary testimonials we have completed. Also click here for news of the use of Entrepreneurs’ Relief in MVLs.

If you are considering a members voluntary liquidation of your business, please contact us or call us on 0208 088 0633 for a FREE initial discussion.

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In More Detail, the key matters for consideration by the Directors with a Members Voluntary Liquidation are:

Declaration of Solvency

For the Company to be placed into members voluntary liquidation, all or a majority of the directors must make a statutory Declaration called a Declaration of Solvency. The Declaration of Solvency must be made no earlier than five weeks before the winding-up resolution for that Company is passed. A solicitor or commissioner of oaths who is independent of the Company and its shareholders must witness the making of the Declaration of Solvency.

It may be convenient for the Board to be reduced to facilitate the Swearing of the Declaration of Solvency.

The Declaration states that the Directors have made full enquiry into that Company’s affairs and that, having done so, they have formed the opinion that the Company will be able to pay its debts in full, together with interest at the official rate (presently 8% per annum) within a maximum of twelve months from the date of liquidation.

Appended to the Declaration of Solvency is a statement of that Company’s assets and liabilities, including any contingent and prospective liabilities referred to below. The responsibility to ensure that all such liabilities are included on the Declaration of Solvency, and therefore ultimately settled in full, falls on the Directors of the Company.

Please note that any Director making a Declaration of Solvency without having reasonable grounds for the opinion that a Company will be able to pay its debts in full, together with interest at the official rate, within the period specified in the Declaration is liable to imprisonment or a fine, or both.

Pre-liquidation Review

It is important that a pre-liquidation review of the affairs of the Company is carried out. This is principally because of the requirements of the Declaration of Solvency referred to above and partly because any matters which emerge part way through the liquidation will inevitably delay its conclusion.

In addition, once appointed the liquidator is responsible for dealing with the Company’s affairs, and not the Directors, and should therefore be made aware of all current or other issues. Potentially this may be costly and it could undoubtedly prove more expensive than if such matters had been resolved prior to liquidation.

Any additional assets or liabilities identified should be added to the figures shown on the Declaration of Solvency.

Creditors’ claims and Contingent creditor claims

Prior to making any distribution to shareholders a liquidator has a statutory duty to make enquiries relating to creditor claims and potential claims. A notice inviting claims is placed in The London Gazette, which satisfies such duties.

If any contracts remain which have existing or contingent liabilities attached to them, such as guarantees, warranties etc, consideration should be given as to how the contracts should be dealt with.

Placing the Company into liquidation

Briefly, the procedure for placing the Company into members’ voluntary liquidation is as follows: –

A meeting of the Board of Directors is convened where the Declaration of Solvency is made by all or a majority of the Directors of the Company. The Declaration must be filed with the Registrar of Companies no later than 15 days after the winding-up Resolution is passed.

The Directors convene a General Meeting at which the shareholders pass a Special Resolution to place the Company into liquidation and appoint the liquidators.

In normal circumstances 14 days’ notice (excluding the date of postage and the date of the proposed meeting) must be given to shareholders of the meetings to place the Company into liquidation. However, the meeting may be held at short notice if 90% of the shareholders, in value of shares, so consent.

Once the Company is in liquidation

Following the General Meeting, the Company is in liquidation and a liquidator has been appointed. At this stage all of the powers of the Directors cease and the liquidators’ will deal with all other winding-up issues.

Briefly, the procedures are as follows:

Closure of the members voluntary  liquidation

Once the above procedures are completed and all the assets have been realised and distributed, the liquidator will prepare a final report on the conduct of the Liquidation. Shareholders have 8 weeks to challenge the final report but can waive this requirement to enable the Liquidation to end sooner.

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