What is a Members’ Voluntary Liquidation (MVL)?

What is the MVL process?

Members’ Voluntary Liquidation is a relatively quick and straightforward way of tying up a company’s loose ends and extracting the profit. It’s important to stress that this procedure is only suitable for limited companies and limited liability partnerships that can afford to repay all their debts.

The MVL process is as follows:

• The directors sign a declaration of solvency to confirm the company’s financial position
• You hold a shareholder meeting and pass a resolution to voluntarily wind up the company
• You appoint a licensed Insolvency Practitioner to manage the liquidation procedure on your behalf
• The liquidator notifies any known creditors (parties the business owes money to) of the company’s liquidation and invites them to submit claims
• The liquidator values and sells the company’s assets to free up funds to repay the creditors
• Once the creditors have been paid in full, the remaining funds are distributed among the shareholders proportionally according to their shareholding
• The company is removed from the official register at Companies House and ceases to exist as a legal entity

Members’ Voluntary Liquidation typically takes three to six months to complete, although it can be longer if the company has lots of physical assets or its assets are difficult to sell.

Usually, the shareholders don’t have to wait for the end of the Liquidation procedure to receive their funds. If there are no outstanding creditor claims, they can be paid a significant distribution when the assets are sold

Why is Members’ Voluntary Liquidation tax efficient?

The other main way to close a solvent limited company is to remove it from the Companies House register using a procedure called Strike Off. Strike Off is cheap as the directors can apply and manage the process themselves. However, only the first £25,000 of cash or assets is treated as a capital gain, the rest is taxed as income. That can leave shareholders with a hefty tax bill to pay.

However, in a Members’ Voluntary Liquidation, all the profits from the business are taxed as capital rather than income. That means you pay Capital Gains Tax (CGT) of 18% for basic-rate taxpayers and 24% at the higher rate. You may also be eligible for Business Asset Disposal Relief, which reduces the CGT payable on qualifying assets to 10%, rising to 14% in April 2025 and 18% in April 2026. That can lead to a significant saving.  

What type of assets can be sold in a Members’ Voluntary Liquidation?

During an MVL, the liquidator will look to sell any company assets that they can readily convert to cash. That includes physical assets such as vehicles, land, property, machinery, stock and office equipment. They can also sell intangible assets like websites, patents, trademarks, domain names and customer lists.

The liquidator will value the assets before they are sold to achieve a fair market price for the benefit of the creditors and shareholders. 

Where are assets sold during a Members’ Voluntary Liquidation?

The liquidator sells the assets on the open market, through online auctions or directly to unrelated third parties or competitors. The most appropriate place for the sale will depend on the nature of the asset. In some cases, a company director may wish to buy a company asset if it holds sentimental value or they want to use it for a future business venture. If they do, they must pay the going rate established by an independent valuation.    

If an asset is difficult to sell, the liquidator may transfer it to the shareholders, known as a ‘distribution in specie’ (in its current form). That can be useful if a shareholder wants to use an asset for a new business. The liquidator will assign the asset a fair market value to ensure a fair distribution among the shareholders. 

Sell and buy assets from liquidated companies

At Eddisons Asset Auctions, we specialise in the sale of business assets during Members’ Voluntary Liquidations. We work closely with Insolvency Practitioners and market assets to the widest audience in the shortest possible time. Find out more about liquidation auctions, browse our assets for sale and buy and sell a wide selection of asset types across diverse sectors.