A members voluntary liquidation is used by a solvent company in order to bring about the end of that company in an orderly manner.
Advantage of a members voluntary liquidation
For a company that is solvent but has had a trading history, or is still trading, there are many advantages of using the formal members voluntary liquidation process to bring it to an end.
- A liquidator is appointed who will collect all the assets of the company, consider claims from creditors, and will review the shareholdings held to provide for surplus funds to be correctly paid to shareholders. The liquidator is a professional independent insolvency practitioner. They ensure all matters are dealt with properly, and funds are distributed under the proper statutory priority order.
- If there are complicated liabilities in the company, or complicated contracts or other interests to be dealt with, this is often best dealt with by a professional adviser.
- If the directors or shareholders are left to deal with the orderly wind down of a company, then unless they are all very much on the same page and have the same interests and rights, their differing interests may be incompatible. This might at best delay the voluntary liquidation process, and at worst may cause the process to de-rail if a dispute arises.
- claims from creditors are more likely to be uncovered and settled by an independent professional insolvency practitioner. This prevents the risk of a creditor being discovered in the future once the company has been dissolved when the assets have already been distributed to shareholders.
Disadvantages of a members voluntary liquidation
- The alternative to a members voluntary liquidation is to apply to Companies House for the company to be dissolved and struck off the Companies Register.
- The dissolution of a company will be quicker and cheaper than bringing in a licensed insolvency practitioner to act as a liquidator in the company.
- A dissolution is more simple and straightforward and therefore inevitably cheaper than a members voluntary liquidation.
Should I use the members voluntary liquidation route, or just apply to dissolve my solvent company?
Unless a company is extremely straightforward, where assets and creditors have long been dealt with already and the company has not traded for a long period, then to dissolve the company directly with Companies House is not a viable option.
If you are considering whether your company could be dissolved in order to bring it to an end, or whether member voluntary liquidation might be required, then speak to one of our company liquidation experts at Francis Wilks & Jones who can talk you through the options and help you decide which is the best based on your own company’s circumstances.