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Can a company with debts enter Members Voluntary Liquidation?

Written by Keith Steven Managing Director 20 December 2019

Can a company with debts enter Members Voluntary Liquidation?

Members voluntary liquidation is a tool to close down a company that is no longer required. The company MUST be solvent and able to pay all of its creditors before the MVL process can commence.

So no, a company with debts cannot generally be liquidated using this method.

Solvent companies may be subject to liquidation proceedings to bring the company to an end and distribute surplus assets. The process is known as a members voluntary liquidation "MVL" and must be handled by a licensed insolvency practitioner(s).

Usually it is a requirement to have filed all accounts and corporation tax returns too. Normally, all taxes must have been paid before the members voluntary liquidation process is started.

Once the company affairs have been brought up to date the director or directors can start the process. MVLs are ONLY available when the directors can declare that the company is solvent and can meet all of its obligations, taxes and creditors IN FULL.

This is known as a Statutory Declaration of Solvency.  This is a very important formal declaration that the company is solvent and can pay all of its liabilities in full within 12 months. This is usually signed shortly before the MVL is formally initiated.

The sworn declaration must also be accompanied by a document known as a statement of affairs. This contains a summary of all assets and liabilities which sets out the company's financial position. Usually, there is no debt owed and a substantial sum of cash or other available assets.

Warning: to swear a statutory declaration of solvency knowing it to be a false declaration, is a criminal offence.

The Members Voluntary Liquidation process ends the life of a company, leaves no outstanding business matters and provides a tax efficient exit route for shareholders.

KSA Group, which operates this website, has a number of insolvency practitioners who have extensive experience in handling MVL's. We tend to work with the company’s existing tax advisers and accountants, to agree the most tax effective and appropriate strategy.

We are sure you have a lot of technical questions. You can find answers to all of these questions by visiting our more detailed members voluntary liquidation guide page here or by downloading our experts guide to Member Voluntary Liquidation

We can drive the MVL process with a competitive fee ranging from £3,500 plus disbursements to around £7,000 depending upon complexity.

Category: Liquidation

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