What is an MVL?
A Members’ Voluntary Liquidation (MVL) is where the shareholders of a solvent company adopt a voluntary winding-up resolution and appoint a liquidator to release the company’s assets so that the funds can be distributed to its shareholders.
In order to be considered legally solvent, the company must be able to meet its financial obligations and the value of its assets must exceed the total sum of all its liabilities.
What is a CVL?
A Creditors’ Voluntary Liquidation (CVL) is a procedure which involves company directors choosing to voluntarily bring an insolvent company to an end by appointing a liquidator to liquidate the company’s assets. Proceeds of the sale of company assets will go to creditors, in a bid to repay debts.
What must directors do if they place their company into an MVL?
During an MVL, the liquidator must ensure that the company is indeed solvent. When a company’s directors place their company into an MVL, they must swear a Declaration of Solvency (in front of a solicitor or public notary) to declare that the assets of the company are sufficient to pay creditors in full.
How can additional creditors’ claims affect an MVL?
Within the MVL process statutory adverts are placed in the London Gazette (or Belfast / Edinburgh Gazette, as applicable). These are to provide any creditors with the opportunity to come forward to submit claims against the company.
Normally, no creditors come forward in the MVL process. However, occasionally they do and if their claims against the company are valid and the company cannot pay those debts, then the company is insolvent. So, it cannot go through the MVL process but must instead go through the CVL process.
Looking for liquidation advice?
Whether your company is solvent or insolvent, we can help you with the liquidation process – as we have helped thousands of company directors.
Our advice is free, and our liquidation fees are very affordable (for both MVLs and CVLs).
Putting your company into an MVL, when it is actually insolvent and should go into a CVL, can have serious repercussions for the company directors.
So, if you are not sure which liquidation is right for your company, you should seek professional advice.
Get in touch with the team at Clarke Bell today.