Members Voluntary Liquidation (MVL) – What is Members Voluntary Liquidation?
A Members Voluntary Liquidation can take place when the directors of a company believe that the company is solvent but they no longer wish for the company to trade. This may be because the owner director is to retire and prefers to liquidate the company and its assets rather than sell.
When is a Members Voluntary Liquidation Appropriate?
If the company has sufficient assets to be able to pay all of its creditors in full (together with all costs) the liquidation is referred to as a solvent liquidation, or Members Voluntary Liquidation.
How is a Members Voluntary Liquidation Undertaken?
The company directors must make a statutory declaration that they believe the company will be able to pay its debts in full within 12 months from the start of the voluntary winding up.
The statutory declaration will state that the directors have made a full inquiry into the company’s affairs. The declaration will include a statement of the company’s assets and liabilities as at the latest practicable date before making the declaration.
The liquidation starts when the members, in general meeting, pass a resolution (usually a special resolution) to wind up the company voluntarily.
Notice of the special resolution for voluntary winding up of the company must be published in the Gazette within 14 days of the general meeting. The company must also send a copy of the declaration and the special resolution to the Registrar within 15 days of the general meeting.
Can a Members Voluntary Liquidation be converted into a Creditors Voluntary Liquidation?
Yes. If the liquidator decides that the company will not be able to pay its debts in full in the period stated in the directors’ statutory declaration of solvency, he or she must call a meeting of the creditors which must be held within 28 days. The liquidation becomes a CVL from the date of the meeting.
What happens to employees in a Members Voluntary Liquidation?
All employees are subject to the employment contracts will be served redundancy notice a minimum one month before the liquidation. The company will cover all the statutory payments and fees in accordance with the employment law.