A Member's Voluntary Liquidation is a procedure that can only be used when a Limited company or LLP is solvent.
It is the members, i.e. the company shareholders, that control the liquidation process, and hence the name 'Members Voluntary Liquidation'.
The directors of a company instruct an Insolvency Practitioner to formally wind up its affairs. Trade ceases, assets are realised and the liabilities quantified and paid with any surplus remaining thereafter distributed to shareholders.
The company's assets should be sufficient to pay all debts in full, interest on those debts and the cost associated with the liquidation. The whole process should be concluded within a period of twelve months TEST.
There are many reasons why directors may wish to place a company into Members Voluntary Liquidation. Such may include the release of capital, the realisation that a major contract will not be renewed, the retirement of the sole director and shareholder, a disagreement between the directors and shareholders, or completion of a project for which the company was set up.
A major benefit of Members Voluntary Liquidation is that creditors who do not prove their debt in the liquidation are unable to claim against the company once certain statutory procedures have been completed.