Company liquidation

Members' voluntary liquidation (MVL) is when a company or limited liability partnership (LLP) is solvent and has sufficient assets to pay their creditors.

Formal declaration of solvency

The directors of a company must make a formal declaration of solvency and file it with Companies House. The declaration must:

• be made by the majority of directors on a date no more than five weeks before the passing of the resolution for voluntary winding up
• be filed at Companies Registry
• state that the directors have made a full inquiry into the company's affairs and are of the opinion that the company can pay its debts and interest within a maximum of 12 months
• include an up-to-date statement of the company's assets and liabilities

It is a criminal offence to make a declaration of solvency without reasonable grounds.

Resolutions for winding up

A general meeting must be held by the shareholders of a company. At this meeting, resolutions for winding up the company are passed, along with the appointment of a liquidator. A special resolution must be passed by shareholders for a winding-up.

The shareholders must pass a special resolution for winding up, unless:

• the company resolves that it cannot continue its business because of its liabilities, when an extraordinary resolution is required
• the articles of association of the company provide for it to be dissolved at a certain time, or following a certain event, when an ordinary resolution is required

If it later turns out that the company is not solvent, the liquidator will call a meeting of creditors and the liquidation becomes a creditors' voluntary liquidation.