Members’ Voluntary Liquidation – MVL
Liquidation (or ‘winding up’) is the most common type of corporate insolvency procedure. Liquidation is the formal winding up of a company’s affairs entailing the realisation of its assets and the distribution of the proceeds in a prescribed order of priority. With few exceptions, liquidation is the end of the road for a company and following liquidation it will be removed from the companies register. Liquidation may occur following a receivership or administration.
Liquidation may be either compulsory, when it is instituted by order of the court, or voluntary, when it is instituted by resolution of the shareholders. Voluntary liquidation is the more common of the two. An insolvent voluntary liquidation is known as a ‘creditors’ voluntary liquidation’ because its conduct is primarily under the control of the creditors. A solvent voluntary liquidation is known as a ‘members’ voluntary liquidation’, because its conduct is primarily under the control of its members.
A solvent liquidation is known as a members’ voluntary liquidation (or MVL), in which a liquidator is appointed by the shareholders and the company’s assets are sufficient to settle all its debts with 12 months. MVLs may be used for purposes of reorganisation, or in the case of owner-managed businesses to enable the shareholders to realise their interest in the company.