Members’ voluntary liquidation (MVL) meaning

Background Statutory declarations form an essential component of insolvency processes, arising most frequently when a company proceeds by members’ voluntary liquidation (MVL) under section 89 of the Insolvency Act 1986 (IA 1986), and also when administration is commenced by an out-of-court appointment in accordance with the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024, r 3.17. Section 20 of the Statutory Declarations Act 1835 (SDA 1835) sets out the required form of the declaration, as contained in the Schedule to that Act. Under SDA 1835, s 19, a fee is payable, the amount of which is fixed by the Commissioners for Oaths (Fees) Order 1993, SI 1993/2297. The fee is £5 for taking an affidavit, declaration, or affirmation, together with an additional £2 for each exhibit referred to therein that must be marked, or for every schedule that is required to be marked. Save for prescribing the template of the statutory declaration and making provision for the relevant fees, no further formal requirements are stipulated. Accordingly, the...

Where it is proposed to wind up a solvent company voluntarily When a solvent company is to be wound up voluntarily, the directors may, at a board meeting, make a statutory declaration of solvency confirming that, after a full enquiry into the company’s affairs, they hold the view the company can pay all its debts in full, together with interest at the official rate, within no more than 12 months from the commencement of the winding-up. See Practice Notes: What is a members’ voluntary liquidation and when is it typically used? MVL—the information and documents to be provided to the liquidator by the company It should be noted that if the directors make such a statutory declaration, the company proceeds by way of a members’ voluntary liquidation (MVL). Where no declaration is made, the company instead enters a creditors’ voluntary liquidation. See Practice Notes: Placing a company into MVL What is a statutory declaration of solvency...

In this issue: Corporate insolvency process Personal insolvency Document review Restructuring Directors and insolvency Creditor participation Employees and insolvency Partnership insolvency International restructuring and insolvency Daily and weekly news alerts New content New Q&As Corporate insolvency process Contested debt and shift from members’ voluntary liquidation to creditors’ voluntary liquidation (Noal SCSp v Novalpina Capital LLP (in members voluntary liquidation)) This ruling makes clear that where a company in members’ voluntary liquidation (MVL) cannot satisfy all liabilities in full, together with interest at the official rate, within the timeframe specified in the directors’ declaration under section 89 of the Insolvency Act 1986 (IA 1986), it must move into creditors’ voluntary liquidation (CVL). There is no solvency assessment available to alter that timeframe. As the entity is already in liquidation, the liquidator lacks any discretion and is required, by IA 1986, s 95, to effect the conversion from MVL to CVL....

What are the practical implications of this case? When proposing an MVL, directors must ensure their advisers receive every pertinent detail. If a liability is overlooked or contested, the MVL will almost inevitably have to switch to a CVL unless that sum is settled in full within 12 months, or any shorter timeframe set out in the directors’ declaration. The liquidator has no latitude to prolong this window. Under IA 1986, s 95, the liquidator is under a duty to effect conversion from MVL to CVL within seven days of concluding that the 12‑month cut-off (or any shorter period specified by the director(s)) will not be achieved. Once an MVL is underway, creditors of the company gain the advantage in any dispute because the 12‑month MVL deadline cannot be lengthened. Directors should also note that disputed sums are treated no differently for these purposes, and failure to meet the declared timetable compels conversion. There is no scope for any extension. Parties contemplating an MVL would be well...

In this issue: Key R&I law developments Corporate insolvency processes Personal insolvency Restructuring Directors and insolvency Insolvency litigation R&I in Scotland Daily and weekly news alerts Key dates for restructuring and insolvency professionals Key R&I law developments Insolvency Service publishes monthly insolvency statistics for December 2024 The Insolvency Service has issued its monthly insolvency figures for December 2024, covering corporate and personal cases in England and Wales. The figures indicate there were 1,838 company insolvencies, 6% fewer than in November 2024 and 14% down on December 2023. For individuals, total insolvencies in December 2024 were 10,050, similar to November 2024 and 23% higher than December 2023. See: LNB News 21/01/2025 16. Companies House announces implementation dates for key regulations of the ECCTA 2023 Companies House has published an updated transition plan for the Economic Crime and Corporate Transparency Act 2023 (ECCTA 2023), which received Royal Assent on 26 October 2023;...

The resolution to wind-up A company can move into voluntary liquidation only if one of the following applies: its fixed duration has ended, or an event specified in its articles as triggering liquidation has occurred, and the company has approved an ordinary resolution to wind up; or it passes a special resolution to be wound up voluntarily. See: 97 Notice of meeting to pass ordinary or special resolution to wind up: Encyclopaedia of Forms and Precedents [1441] 103 Special resolution to wind up and appoint liquidator: Encyclopaedia of Forms and Precedents [1452] The former practice of proceeding by extraordinary resolution is no longer available under the Companies Act 2006. Where the directors make a declaration of solvency under section 89 of the Insolvency Act 1986 (IA 1986), the company may proceed by way of a members’ voluntary liquidation (MVL). For further information, see Practice Note: What is a members’ voluntary liquidation and when is...

This Practice Note presents an overview of the principal points concerning a members’ voluntary liquidation (MVL) from a dispute resolution perspective. What is a MVL? An MVL is the procedure by which a company, via a resolution of its members, elects to cease its operations and progress towards dissolution. Throughout the process, a licensed insolvency practitioner, authorised by a recognised professional body, must be appointed as the company’s liquidator. An MVL is usually chosen where a solvent company has fulfilled its purpose and the members no longer wish to keep it as a corporate vehicle. It is also adopted where members intend to realise their investment in a solvent company. For further reading, see Practice Note: What is a members’ voluntary liquidation and when is it typically used? If the company is insolvent, an alternative route is required, such as a creditors’ voluntary liquidation (CVL) or compulsory liquidation. For further reading on these processes, see Practice Notes: Corporate insolvency for dispute resolution practitioners: creditors’...

The Insolvency (Scotland) (Receivership and Winding up) Rules 2018 The Insolvency (Scotland) (Receivership and Winding up) Rules 2018 (ISRWR 2018), SSI 2018/347, were presented to the Scottish Parliament on 14 November 2018 and took effect from 6 April 2019. As a result, these Rules altered the procedure for members’ voluntary liquidations (MVLs) in Scotland. Later, the Insolvency (Scotland) (Receivership and Winding Up) (Amendment) Rules 2021 (ISRWAR 2021), SI 2021/1025, were placed before the Scottish Parliament on 9 September 2021 and commenced on 1 October 2021. These subsequent Regulations amend the original Rules. Accordingly, this Practice Note addresses the law, procedures and practice governing Scottish MVLs from 6 April 2019 onwards, as contained in ISRWR 2018, SSI 2018/347, Part 3, and ISRWAR 2021, SI 2021/1025, Part 2. What is an MVL? An MVL is the procedure whereby a company’s members pass a special resolution to cease trading and appoint a liquidator to return the company’s capital to shareholders, culminating in the company’s dissolution. It is suited to solvent...

The Industrial and Provident Societies Act 1965 (IPSA 1965) has been revoked. The Co‑operative and Community Benefit Societies Act 2014 (CCBSA 2014) now regulates how registered societies are formed and run. Per CCBSA 2014, s 1(1)(b), ‘registered society’ covers, via CCBSA 2014, s 150, societies which, immediately before 1 August 2014, were registered or regarded as registered under IPSA 1965 at that time...

Insolvency Rules 2016 (IR 2016), SI 2016/1024, Part 14 Part 14 of the Insolvency Rules 2016 (SI 2016/1024), which sets out how creditors’ claims are dealt with, also operates in a members’ voluntary liquidation (MVL) by reason of r 14.1(1). That rule confirms that this Part applies to administration, winding up and bankruptcy proceedings, without any restriction confining its operation to insolvent liquidations. What amounts to a provable debt in a winding up (and equally in administration and bankruptcy) is defined by r 14.2(1). Save as otherwise provided in that rule, every creditor’s claim is provable as a debt against the company or the bankrupt, whether the liability is present or future, certain or contingent, ascertained or recoverable only in damages. For further guidance, see Practice Note: Future debts, contingent debts, secured debts...