What is voluntary liquidation?
Voluntary liquidation is the self-imposed wind-up and closure of a limited company, which is approved by the company’s shareholders. There are two types of voluntary liquidation procedures, which must be carried out by a licensed insolvency practitioner. A Members Voluntary Liquidation (MVL) for solvent companies and a Creditors Voluntary Liquidation (CVL) for insolvent companies.
Should my company enter a solvent or insolvent voluntary liquidation?
The solvent position of your company will be the biggest factor when determining which formal liquidation procedure your company should enter. As company director, you should always be aware of your company’s solvent position.
Defined by The Insolvency Act 1986, there are two ways of determining if your company is insolvent:
- Cash flow test
A company should be able to pay its bills and liabilities as they fall due. If not, it may be insolvent. - Balance sheet test
If your company’s liabilities exceed the value of its assets, your company could be insolvent. The amount you owe to creditors should not be more than the value of your company’s assets, including any money it currently has in the bank.
Liabilities resulting from legal action, including County Court Judgements (CCJs), that remain unpaid are another indication of insolvency.
How we can help you voluntarily close and liquidate an insolvent company
If your company is struggling financially and you want to close it, we can help by carrying out the formal liquidation procedures below to close your insolvent company.
- Close your company down via a Creditors Voluntary Liquidation (CVL)
A CVL is a liquidation procedure for companies that are insolvent. The process will formally close and liquidate your company, ceasing its trading operations, realising any assets, and removing the threat of creditor legal action. If your company has employees, they can claim for redundancy and other statutory entitlements through the government’s Redundancy Payment Service (RPS). The process is final and irreversible. Once completed, your company’s unsecured debt will be written off and the company is dissolved, allowing you, the director, to move on.
- Close your company down and start again via a pre-pack liquidation
A pre-pack liquidation is a type of CVL where the sale of your company’s assets is arranged before liquidation, allowing business operations to continue seamlessly under the purchasing company. The company name may be reused, and employees can transfer under TUPE. Contracts and essential agreements can also be included as part of a sale, ensuring minimal disruption to your business operations. This process eliminates the unsecured debts of your previous company, providing a fresh start free from previous unsecured liabilities.
How we can help you voluntarily close and liquidate your solvent company
If you are looking to close your solvent company in the most tax-efficient manner, we can help by carrying out the voluntary liquidation procedure below.
- Close your company down via a Creditors Voluntary Liquidation (CVL)
A CVL is a liquidation procedure for companies that are insolvent. The process will formally close and liquidate your company, ceasing its trading operations, realising any assets, and removing the threat of creditor legal action. If your company has employees, they can claim for redundancy and other statutory entitlements through the government’s Redundancy Payment Service (RPS). The process is final and irreversible. Once completed, your company’s unsecured debt will be written off and the company is dissolved, allowing you, the director, to move on.
- Close and liquidate your solvent company via a Members Voluntary Liquidation (MVL)
An MVL is the liquidation and closure of a solvent company. The procedure will formally wind up and close your company, whilst extracting the company’s maximum value, through its various tax benefits. The company’s assets, including any premises, are realised, with the remaining funds distributed to shareholders once creditors are satisfied.
How to get in touch with us: The next steps
- Speak with our initial advisers
Contact our team via phone, filling out our form, or online chat. We will assess your circumstances and, if suitable, arrange a free consultation with a consultant to discuss your company’s situation. - Initial assessment
During the consultation, we will advise if an insolvency procedure is the most appropriate route forward or whether alternative solutions better suit your company’s problems - Formally engage with Wilson Field
If there is an appropriate insolvency solution, we will confirm the necessary steps to start the procedure and will issue you with the relevant documentation for you to formally engage us.
In summary
A voluntary liquidation is the formal liquidation and closure of either a solvent or insolvent limited company. Any voluntary liquidation must be initiated by you, the company director, and the two types of voluntary liquidation, an MVL and a CVL, can only be carried out by a licensed insolvency practitioner.