A Members’ Voluntary Liquidation, or “MVL”, is a legal process whereby a solvent company is wound up and dissolved. The primary objectives are to realise and to distribute the surplus assets of the company once all outstanding matters have been resolved and any remaining creditor claims settled.

MVL – Entrepreneurs Relief

You may be able to pay less Capital Gains Tax when you sell all or part of your business. Entrepreneurs Relief means you will pay tax at 10% on qualifying assets, instead of the normal rate of 18% or 28%

Entrepreneurs’ tax relief is currently available on up to £10 million lifetime gains, so your tax saving could be up to £1,800,000.

Eligibility for Entrepreneurs Relief

Entrepreneurs’ tax relief is available on the disposal of all or part of a business that an individual has owned for at least one year prior to the date of disposal. The disposal must be    of assets comprising the business, and not just of assets used in the business. To claim relief, you have to satisfy a number of conditions through the qualifying period, which depend on the type of business disposal you’ve made. Relief is available where there is either:

  • Material disposal of business assets
  • Disposal associated with a material disposal
  • Disposal of trust business assets

If you dispose of any of the following you will qualify for entrepreneur’s relief

  • All or part of your business as a sole trader or business partner – including the business’s assets after it closed. But you must have owned the business for at least one year
  • Shares in a company where you have at least 5% of shares and voting rights, but you must have owned the business for at least one year
  • Shares in a company where you have at least 5% of shares and voting rights, but you must have owned the business for at least one year before the date you sell or close it
  • Assets you lent to your business or personal company

If you are selling shares, all the following must apply for at least one year before you sell your shares:

  • You have at least 5% of shares and voting rights in the company
  • You are an employee or director of the company (or one in the same group)
  • The company’s main activities are in trading (rather than non-trading activities like investment)


 1 – Initial Assessment

  • Is the company surplus to requirements?
  • Is the company solvent?
  • Is MVL the appropriate mechanism?

 2 – Pre-Liquidation Review

  • Wind down trading operations as necessary and review company’s affairs
  • Consider retention of company name
  • Identify actual and contingent liabilities
  • Discuss need for an indemnity
  • Review statutory affairs of company
  • Possible tax consequences of Liquidation to be discussed with tax advisors
  • Declare any pre-Liquidation dividends, subject to above tax advice
  • Finalise and formalise any necessary pre-Liquidation transactions
  • Prepare statutory Declaration of Solvency

3 – Initiation of Liquidation

  • Convene directors’ meeting
  • Review management accounts and confirm solvency of company
  • Sign & certify statutory Declaration of Solvency (valid five weeks only)
  • Convene Extraordinary General Meeting of shareholders (EGM), or propose written resolutions

4 – Commencement of Liquidation

  • EGM or written resolution to wind up the company
  • Pass winding up and ancillary resolutions
  • Certificate of appointment of Liquidator

5 – Post Liquidation

  • Statutory filing and advertising within prescribed time limits
  • Notification of the Liquidator’s appointment to relevant authorities and interested parties
  • Collection of books and records and company seal
  • Closure of company bank account(s), open new Liquidation bank account(s) where applicable
  • Complete asset realisation where necessary
  • Agree and settle creditors’ claims (with statutory interest)
  • Ensure Corporation Tax, PAYE & NIC and VAT compliance concluded
  • Obtain tax clearance
  • File Liquidator’s receipts and payments accounts
  • Distribute surplus assets to shareholders

Distribution of assets

The liquidator’s role is to collect assets, pay any creditors outstanding and then pay the remaining sums to the shareholders before dissolving the company.

Because the company continues in existence and the liquidator deals with the company’s property on its behalf, not on their own behalf, the liquidator will usually take no personal liability under contracts. However, if it later transpires that there were outstanding creditors    of whose existence the liquidator was not notified, the liquidator will want to put in place a mechanism to enable them to recoup monies distributed to members to pay that creditor if required. If a creditor remains unpaid, this can lead to an insolvent liquidation being declared. This is not in anyone’s interests, especially the shareholders.

A liquidator will therefore usually require a deed of indemnity to be signed by every shareholder who receives a distribution.

Such indemnity will usually provide that the shareholder keep the liquidator(s) and their partners, now or in the future, and their personal representatives’ estates and effects at all times fully indemnified against all actions, proceedings, claims, and costs arising out of any act, matter or thing done by the liquidator(s) in the performance of their duties as liquidator of the company or any act specifically done in accordance with any direction, instruction or request of the shareholder, particularly any direction, instruction or request to distribute the assets of the company prior to agreeing or settling creditors’ claims.

Members will be required to undertake to pay in cash within a specified time period all amounts demanded to be returned by the liquidator.

6 – Close of Liquidation

  • Circulate first and final progress report together with final receipts and payments account to shareholders
  • If no objection from shareholders within 8 weeks of the report, the Liquidator is automatically granted his release.

7 – Dissolution

  • Company dissolved three months from the date of filing of Liquidator’s final return
  • Disposal of books and records (12 months after dissolution)