Members Voluntary Liquidation (MVL)

When a company has completed its purpose or the directors of a company decide to retire, a Tax efficient way of releasing the surplus which may have accumulated is to place the company into an MVL.

Who uses an MVL?

Shareholders who need to distribute cash and assets in a tax advantageous way use a MVL. The Tax advantage for shareholders is that a capital gain received on their shares will only be taxed at 33%, whereas if the surplus monies were taken out as salary, then these monies may be taxed at a much higher marginal tax rate.

A popular way to distribute certain assets to shareholders is to distribute them in specie i.e. in kind. Thus, freehold property may be transferred to shareholders directly. A significant advantage of in specie distributions is that no stamp duty is payable.

MVL process

To place a company into an MVL, the directors must follow a Summary Approval Procedure as set out in Ch.7 Pt 4 of the Companies Act 2014. The directors have to make a provide a Declaration which summarises the company’s assets and liabilities and the directors must state that the company will be able to pay all of its debts in full within 12 months of the commencement of the Liquidation. There may be serious consequences for the directors if their Declaration of Solvency is inaccurate. A copy of the declaration must be sent to all shareholders, together with a formal notice of the shareholders meeting.

The Declaration must be:-Made in writing
-By all or a majority of directors
-At a meeting held not earlier than 30 days before the shareholders meeting
-State the amount of current assets and liabilities
-That the company will be able to pay its debts in full within 12 months of commencement of winding up
-Accompanied by an auditors report stating that the declaration is not unreasonable
-Appended to shareholders notice/resolution
-Delivered to CRO within 14 days

At the shareholders meeting, a special resolution must be passed i.e. 75% of the shareholders voting must vote in favour of the resolution.


We perform MVL’s and advise directors about the procedures required.

Rose Marie Keaveney

Rose Marie Keaveney FCA CPIP

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