A guide to Members' Voluntary Liquidation (MVL) in the UK 2025

What is Members Voluntary Liquidation? (MVL)

Members’ Voluntary Liquidation is the formal process of tying up a solvent company’s loose ends after its owner (or owners) decide to dissolve the firm. 

For this to be happen, the company must be solvent, which means it can pay its debts and cover the fees of any legal disputes using its profits and assets.

A Declaration of Solvency is sworn as part of the process, and you need to involve a licensed Insolvency Practitioner (IP) to get that done.

Why and when to use an MVL

Companies often go for a Members’ Voluntary Liquidation because of its potential taxation benefits. Capital gains tax applies rather than income tax, and companies that go down this route are also eligible for Business Asset Disposal Relief (BADR), which offers a lower tax rate. 

An MVL is often used as a quick, structured way to bring a firm’s operations to an end when its director is ready to retire or pursue something new.

But before you rush off to get started, it’s a good idea to plan ahead by contacting an insolvency practitioner. This means you’ll be ready to pursue MVL when the time is right.

The MVL process: step-by-step

What is the MVL process?

MVL is a voluntary process that involves finalising the company’s affairs so that it satisfies the owners, directors, and shareholders.

Eligibility check

Only solvent companies can pursue an MVL, so verifying solvency is crucial. Also, shareholders have to approve of the MVL, and they also get a say in how the process goes ahead. 

Declaration of solvency

A Declaration of Solvency confirms that the firm can repay its debts within 12 months (including interest payments). This is a statutory document signed by directors.

Appointing a licensed insolvency practitioner 

A licensed insolvency practitioner oversees the MVL process, including counting assets, and liabilities, getting references from HMRC, and helping with the liquidation process.

Asset liquidation and distribution

A liquidator is appointed to settle the debts of the company. This includes advertising for additional claims in The Gazette, which, which gives creditors 21 days to make a claim.

Once it's been confirmed that there are no more debts, the liquidator will make a distribution to the shareholders. Any non-cash assets have to be valued first.

Company dissolution

To formally close the company, it’s removed from Companies House.

Shareholders' roles and responsibilities

At an extraordinary general meeting (EGM), 75% of shareholders have to agree to the appointment of a liquidator.

Shareholders are also a part of other meetings in the process and must agree on the appointment of a liquidator.

Final meetings and documentation

One of the final steps is for the liquidator or insolvency practitioner to obtain clearance from HMRC to finish the MVL process.

What are the tax benefits of an MVL?

One of the biggest benefits of pursuing an MVL is the preferential tax rules, as detailed below.

Business Asset Disposal Relief (BADR)

Business Asset Disposal Relief (BADR), which used to be called Entrepreneurs’ Relief, reduces Capital Gains Tax (CGT) down to 10% on qualifying gains.

Companies are eligible for BADR if they’ve been trading over the last 24 months and individuals have a share of at least 5%.

It’s worth noting that this is due to change in the future and is set to increase in the 2025-2026 tax year (and again in the 2026-2027 tax year). Also, it has a lifetime limit of £1m.

Treatment of dividends vs. capital distributions

If a company’s assets are below £25,000, distributions before its dissolution are treated as a capital gain. BADR may be available to reduce the taxes further.

Above this amount, distributions are treated as a dividend, and BADR isn't available.

Reclaiming VAT

To reclaim VAT during an MVL, ask your insolvency practitioners to make a claim.

Handling contingent liabilities

Contingent liabilities are debts companies may incur in the future, and they must be accounted for in an MVL. They can affect eligibility for BADR.

Alternatives to an MVL

Companies can also be dissolved through a strike-off or a Creditors’ Voluntary Liquidation (CVL) and compulsory liquidation.

Members' Voluntary Liquidation (MVL) vs strike-off

A strike-off is a simple, less formal way of closing a company. It generally costs less money, but it can end up being more expensive for a company that needs to distribute more than £25,000.

However, it’s not possible to pursue a straightforward strike-off if there are any objections. 

MVL vs CVL

If a company can't pay all its debts, it has to choose a Creditors’ Voluntary Liquidation (CVL) instead of an MVL. The overall idea is similar, but assets will be distributed to creditors rather than shareholders, and these creditors are involved in the process.

How much does an MVL cost?

The cost of an MVL may vary depending on the scope of work the Liquidator must carry out. Typically, costs start at around £3,000.

Additional fees include disbursements, Gazette advertisements, and VAT.

Legal aspects of MVL

The MVL process includes the need to settle any legal disputes. 

Role of legal advisors

The role of a licensed insolvency practitioner includes mediating between creditors and debtors to settle any disputes. They are adept at navigating these situations and are used to helping businesses with financial difficulties.

They also ensure compliance with all statutory obligations.

Practical considerations and timeline of MVL

As we’ve seen, MVL is a complex process involving various steps, so it’s important to be realistic about how long it will take.

So, how long does an MVL take?

An MVL must be completed after 12 months. It often takes 3 to 6 months, as it can take a while to receive clearance from HMRC.

How to speed up the MVL process

The best way to expedite the MVL process is to be prepared. If you’ve already paid off your debts and prepared financial records, it'll be much quicker and easier for the liquidator to distribute assets and complete the process.

It’s advisable to submit and pay all HMRC returns and liabilities.

What are disbursements in an MVL?

Disbursements are payments made by third parties as part of the MVL process. They are separate from the fee paid to the insolvency practitioner.

They may cover expenses like search fees, statutory bonds, or advertising the liquidation of the company in the Gazette.

An MVL would be the ideal choice in the case of a tech company with 3 founders that was successful for a decade. Over time, the founders began to lose interest in the project, and its growth slowed, but it is still profitable.

As their company had no debts, had completed all contracts, and had significant cash reserves, an MVL was a viable option.

The 3 founders made a Directors’ Declaration of Solvency, which included a commitment to pay all debts within 12 months. They then held a Shareholder Resolution to place the firm into an MVL, which included appointing a licensed insolvency practitioner.

This practitioner took control of the assets and distributed them between the three founders (the only shareholders) after confirming there were no liabilities.

Finally, the practitioner officially dissolved the firm with Companies House.

Is an MVL right for your company?

If the director of a company is ready to retire and the firm is solvent and has high retained profits, an MVL is probably the best way to dissolve due to the potential tax benefits.

However, if a company isn't solvent, a Creditors Voluntary Liquidation (CVL) may be the only option, and a simple strike-off makes sense for companies with minimal assets if all parties involved can reach an agreement. 

Can a company reverse a decision to enter MVL?

It’s possible to reverse the MVL process before the final distribution of assets, but it’s very complicated. 

What happens if undisclosed liabilities arise during the MVL process?

The liquidator will prioritise settling these liabilities before proceeding. If undisclosed liabilities would make a company insolvent, the MVL cannot go ahead and a CVL must be pursued instead.

Are directors liable for any debts after MVL has been completed?

Generally, directors aren’t liable for debts after the MVL is finished, as long as they didn’t make any false decorations or engage in fraudulent activity.

How are employees affected during an MVL?

Employees are generally made redundant during an MVL, as the company will no longer exist once it’s wound up.

Can MVL be initiated if the company has ceased trading years ago?

Yes, it is still possible to pursue an MVL as long as the necessary records are available and the company is still solvent.

What are the risks of incorrectly executing an MVL?

Incorrectly executing an MVL could result in legal challenges from shareholders or creditors, as well as creditor claims and the loss of tax benefits.

How does MVL affect a director’s future ability to trade?

A director’s future ability to trade isn’t usually affected by an MVL, as long as there was no misconduct.

Is it possible to convert from MVL to another form of liquidation if circumstances change?

Yes, changing from an MVL to a CVL is necessary if the company is no longer solvent.

Can shareholders appoint more than one liquidator?

Yes, shareholders can appoint joint or multiple liquidators.

What are the implications of MVL for foreign shareholders?

Foreign shareholders and UK shareholders are treated the same during asset distributions. However, they may face tax implications in their own countries.

When is the best time to do an MVL?

The best time to pursue an MVL is when a company is solvent, facing no legal issues, and its shareholders are all ready to move on.

Why might contractors consider an MVL?

Contractors may consider an MVL if they operate through a limited company, want to cease trading, and wish to extract their profits in the most tax-efficient way.

Will my money be safe during the MVL process?

MVLs should be carried out by a licensed insolvency practitioner, ensuring the process is regulated and assets are protected.

What is a Section 110 scheme of arrangement MVL?

Section 10 is a procedure that allows the movement of assets from one company to another. It’s generally used when directors want to restructure a firm.

What is a signed indemnity in a Members' Voluntary Liquidation (MVL)?

A signed indemnity is a document in which shareholders agree to accept financial responsibility for undisclosed liabilities that arise once the MVL is complete.

Is BADR at risk of legislative changes?

BADR tax rates are set to increase in the coming tax years, and there may be a  risk of further changes.