Members Voluntary Liquidation Rules: Requirements and Eligibility

A company must satisfy several requirements before entering a Members Voluntary Liquidation.

The core requirements are:

• the company must be solvent;
• the directors must reasonably believe all debts can be paid in full;
• applicable interest must also be capable of being paid;
• payment must be possible within no more than 12 months from the start of the winding-up;
• a majority of directors must make a Declaration of Solvency;
• shareholders must approve the voluntary winding-up; and
• an authorised insolvency practitioner must be appointed as liquidator.

An MVL is therefore very different from a Creditors Voluntary Liquidation, which is used where a company is insolvent.

Read our guide to the difference between a CVL and MVL.

The most important MVL requirement is solvency.

An MVL is intended for companies that can meet their liabilities in full.

The directors must make a full enquiry into the company’s affairs and conclude that the company will be able to pay its debts, together with applicable interest, within the statutory period.

This means directors should consider more than simply whether the company has more assets than liabilities on paper.

They should review matters such as:

• Corporation Tax;
• VAT;
• PAYE and National Insurance;
• trade creditors;
• loans;
• employee liabilities;
• leases or contracts;
• guarantees;
• disputed claims;
• potential future liabilities; and
• contingent liabilities.

A company that cannot satisfy the solvency requirements may need to consider an insolvent liquidation procedure instead.

The directors must believe that all company debts can be paid in full, together with applicable interest, within a maximum period of 12 months from the commencement of the winding-up.

This is a particularly important rule following the High Court decision in NOAL SCSp & Ors v Novalpina Capital LLP & Ors [2025].

The decision reinforced that the 12-month requirement is not simply an estimate of whether the company is broadly solvent.

Directors need to consider whether liabilities can actually be settled within the required period.

That includes liabilities that may be:

• contingent;
• disputed;
• uncertain in amount; or
• not yet formally claimed.

Directors should therefore investigate the company’s position thoroughly before signing the Declaration of Solvency.

An MVL cannot simply be conducted by the directors themselves.

The shareholders appoint an authorised insolvency practitioner to act as liquidator.

Once appointed, the liquidator takes responsibility for winding up the company’s affairs.

Their role can include:

• taking control of company assets;
• dealing with creditors;
• resolving outstanding liabilities;
• handling tax matters;
• realising or transferring assets;
• making distributions to shareholders; and
• completing the statutory liquidation filings.

For the step-by-step procedure, see our Members Voluntary Liquidation process guide.

Yes.

A company does not necessarily need to have paid every liability before the MVL begins.

The important requirement is that the directors can properly declare that all debts and applicable interest will be paid in full within the required period.

For example, the company may still have:

• a final Corporation Tax liability;
• VAT due;
• professional fees;
• trade creditors; or
• other known liabilities.

These can be dealt with during the liquidation, provided the solvency test is genuinely satisfied.

Before proceeding with an MVL, directors should be able to answer yes to the following core questions:

• Is the company solvent?
• Can all debts be paid in full?
• Can applicable interest also be paid?
• Can this be achieved within no more than 12 months?
• Have contingent and disputed liabilities been considered?
• Have the directors made a full enquiry into the company’s affairs?
• Can a majority of directors make the Declaration of Solvency?
• Will the shareholders approve the winding-up?
• Can an authorised insolvency practitioner be appointed?

If there is uncertainty around any of these points, professional advice should be taken before the declaration is made.

If you’re considering closing a solvent limited company, Business Helpline can help you understand whether an MVL may be appropriate.

Our initial advice is free, confidential and unbiased.

We can help you consider:

• whether the company appears solvent;
• outstanding and potential liabilities;
• the Declaration of Solvency requirements;
• the practical steps involved;
• whether MVL or strike off may be more suitable; and
• the likely costs of proceeding.

Read our main guide to Members Voluntary Liquidation or call our free 24-hour helpline on 0800 088 2142.