Members' voluntary 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.
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