Members' Voluntary Liquidation: A smart exit strategy

What is a Members' Voluntary Liquidation?

A Members' Voluntary Liquidation is a formal procedure used to wind up a solvent company—one that can pay all its debts in full, including statutory interest. It involves appointing a licensed insolvency practitioner as liquidator, who will realise the company’s assets, settle any liabilities, and distribute the remaining funds to shareholders. Once the Members' Voluntary Liquidation process is complete, the company is dissolved.

When should you consider a Members' Voluntary Liquidation?

There are several common scenarios where a Members' Voluntary Liquidation can be beneficial:

• Retirement – When a business owner is stepping away and there is no successor.
• Sale of business or assets – After selling off the core business or key investments.
• End of a project – For companies established for a specific contract or venture.
• Group restructuring – As part of a corporate simplification or post-acquisition consolidation.
• Tax planning – To extract retained profits in a tax-efficient manner through a Members' Voluntary Liquidation.

Six-step Members' Voluntary Liquidation process

1. Initial consultation

When considering a Members' Voluntary Liquidation, a specialist team can help assess your situation and determine whether this option or a simpler strike-off is more appropriate.

2. Solvency declaration

All (or a majority of) directors must swear a statutory declaration of solvency, confirming that the company can pay its debts within 12 months during the Members' Voluntary Liquidation process.

3. Appointment of liquidator

Shareholders pass a resolution to place the company into Members' Voluntary Liquidation and appoint a licensed insolvency practitioner as liquidator.

4. Asset realisation and debt settlement

The liquidator collects and sells company assets, settles all liabilities, and manages any contingent claims during the Members' Voluntary Liquidation.

5. Distribution to shareholders

Once debts are settled, the remaining funds are distributed to shareholders, often in a tax-efficient manner through the Members' Voluntary Liquidation.

6. Final filings and dissolution

After all matters are resolved, the liquidator files final documents with Companies House, and the company is formally dissolved following the Members' Voluntary Liquidation.

Key benefits of a Members' Voluntary Liquidation

Tax efficiency

Distributions to shareholders can often be treated as capital rather than income, potentially qualifying for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), reducing Capital Gains Tax (CGT) to as low as 10% during a Members' Voluntary Liquidation.

Peace of mind

Unlike a strike-off, a Members' Voluntary Liquidation provides a formal, legally robust closure process, minimising the risk of future claims or reinstatement.

Creditor protection

Liquidators have statutory powers to manage creditor claims, including contingent liabilities, ensuring that all debts are properly addressed during a Members' Voluntary Liquidation.

Administrative relief

Once in Members' Voluntary Liquidation, the company is no longer required to file annual accounts or confirmation statements with Companies House.

Barriers to exit

Liquidators can resolve issues such as onerous property, contracts, and leases during the Members' Voluntary Liquidation.

Is a Members' Voluntary Liquidation right for you?

If your company is solvent and you’re looking for a clean, efficient exit, a Members' Voluntary Liquidation could be an option. It’s especially attractive for owner-managed businesses with retained profits, as it allows for tax-efficient extraction of funds and a formal end to the company’s life.

Get in touch with our restructuring specialists

If you would like to discuss the next steps for your business regarding a Members' Voluntary Liquidation, please do get in touch with one of our restructuring and insolvency team.

Contact us today