Creditor’s Voluntary Liquidation (CVL), Member’s Voluntary Liquidation (MVL), and Compulsory Liquidation

Looking for an accountant for your CVL, MVL, or Compulsory Liquidation?

At Plan-A, we provide expert guidance on the different types of liquidation processes available to companies in financial distress or looking to close down in a tax-efficient manner. Whether you’re considering Creditor’s Voluntary Liquidation (CVL), Member’s Voluntary Liquidation (MVL), or Compulsory Liquidation, our experienced team can help you navigate the process and achieve the best possible outcome. Below, we outline the key differences, benefits, and processes of each liquidation type.

Creditor’s Voluntary Liquidation (CVL), Member’s Voluntary Liquidation (MVL), and Compulsory Liquidation

Creditor’s Voluntary Liquidation (CVL)

Creditor’s Voluntary Liquidation (CVL) is the most common form of liquidation for insolvent companies. In this process, the directors decide to voluntarily wind up the company when it can no longer pay its debts. Creditors are given the opportunity to appoint a liquidator to oversee the liquidation process and ensure that assets are distributed fairly.

Key Benefits:

Directors take control

The process is initiated by the company’s directors, allowing them to manage the winding-up rather than waiting for a forced liquidation.

Protection from legal action

Once a liquidator is appointed, the company’s creditors cannot take legal action to recover debts.

Debt relief

CVL offers a formal closure of the business, writing off unsecured debts that the company cannot pay.

How Plan-A Can Help

Guiding you through the CVL process

from the initial decision to appointing a licensed insolvency practitioner.

Handling creditor meetings

and managing communications with creditors.

Liquidating company assets

to repay creditors fairly and efficiently.

The CVL Process

  • Directors realize the company is insolvent and decide to wind it up.
  • Shareholders pass a resolution to appoint a liquidator.
  • A creditors’ meeting is held to approve the liquidation and confirm the liquidator’s appointment.
  • The liquidator sells the company’s assets, distributes the proceeds to creditors, and the company is dissolved

Member’s Voluntary Liquidation (MVL)

Member’s Voluntary Liquidation (MVL) is a tax-efficient method of closing down a solvent company. It is initiated by the company’s shareholders when the business is no longer needed or has achieved its purpose, and all liabilities can be paid in full within 12 months.

Key Benefits:

Tax efficiency

MVL allows shareholders to extract profits from the company in a tax-efficient way, often benefiting from Entrepreneurs’ Relief, which can reduce Capital Gains Tax.

Orderly wind-down

The process allows for an orderly winding up of the company’s affairs with full control over asset distribution.

No impact on credit rating

Since the company is solvent, there are no adverse effects on directors’ or shareholders’ credit histories.

How Plan-A Can Help

Assisting with the MVL process

by ensuring that all financial obligations are settled before distribution.

Providing tax advice

on the most tax-efficient way to distribute remaining assets to shareholders.

Managing compliance

with Companies House and HMRC throughout the liquidation.

The MVL Process

  • The company must be solvent, and a declaration of solvency is signed by the directors.
  • Shareholders pass a resolution to appoint a liquidator.
  • The liquidator sells company assets, settles debts, and distributes the remaining funds to shareholders.
  • Once all assets are distributed, the company is dissolved.

Compulsory  Liquidation

Compulsory Liquidation occurs when a company is forced into liquidation by a court order, usually at the request of creditors who are owed significant debts. This is an involuntary process, and it is often initiated after a company has failed to pay its debts or respond to a winding-up petition.

Key Benefits:

Court-ordered process

The company is liquidated under a court order, allowing creditors to take control of the winding-up process.

Debt recovery for creditors

Compulsory liquidation allows creditors to recover as much as possible from the sale of the company’s assets.

Formal conclusion

The process leads to a formal closure of the company and removes the burden of unpaid debts.

How Plan-A Can Help

Advising directors

on their duties and legal obligations when facing compulsory liquidation.

Assisting with the defence

of winding-up petitions, when appropriate.

Managing the liquidation process

once a liquidator is appointed by the court.

The Compulsory Liquidation Process

  • A creditor (usually owed £750 or more) files a winding-up petition with the court.
  • If the court agrees that the company is insolvent, a winding-up order is issued.
  • A liquidator is appointed by the court to oversee the process, sell assets, and distribute the proceeds to creditors.
  • The company is dissolved once all assets are liquidated.

Choosing the Right Liquidation Process

The decision between CVL, MVL, or Compulsory Liquidation depends on the company’s financial position, goals, and obligations. It’s important to understand the specific requirements of each process to make the right decision for your business.

How Plan-A Can Help

Evaluating your financial situation

to recommend the best liquidation option.

Providing personalized advice

on tax implications and director responsibilities.

Supporting you throughout the entire liquidation process

whether it’s voluntary or compulsory.

Plan-A

Why Choose Plan-A?

Whether your company is insolvent and needs to liquidate its assets, or you’re looking to close a solvent company in a tax-efficient manner, Plan-A offers the expertise and support you need to navigate the process. Our tailored liquidation services help you comply with legal requirements, protect your interests, and ensure a smooth transition.