How to Close a Solvent Company in the UK: MVL Guide

If you want to close a UK limited company that can pay all its debts, a Members' Voluntary Liquidation (MVL) is usually the most tax-efficient route. This guide explains what an MVL involves, when it is appropriate, and what role the Declaration of Solvency plays.

What is a Members' Voluntary Liquidation (MVL)?

An MVL is a formal process for winding up a solvent limited company — one that can pay all its debts in full within 12 months. It is typically used when:

• A business owner is retiring and wants to extract accumulated profits
• A company has completed its purpose and is no longer needed
• Shareholders want to close the company in the most tax-efficient way possible

The key advantage of an MVL over simply dissolving a company (striking off) is that funds distributed to shareholders in an MVL are treated as capital rather than income, meaning they may qualify for Business Asset Disposal Relief (formerly Entrepreneurs' Relief) and be taxed at the Capital Gains Tax rate rather than Income Tax rates. For companies with significant retained profits, the saving can be substantial.

When is an MVL appropriate?

An MVL is typically worth considering when a solvent company has retained profits of £25,000 or more. Below that threshold, the costs of the MVL process may outweigh the tax benefits, and a simple dissolution (striking off) may be more practical.

You should speak to an accountant or tax adviser before proceeding to confirm whether an MVL is right for your situation.

Steps in a Members' Voluntary Liquidation

Step 1 — Directors make a Declaration of Solvency

The majority of the company's directors must sign a Declaration of Solvency (LIQ01 form) in front of a solicitor. This sworn statement confirms the company can pay all its debts within 12 months. This must be done before the shareholders pass the resolution to wind up.

Step 2 — Shareholders pass a winding-up resolution

Within five weeks of the Declaration of Solvency being made, the shareholders must pass a special resolution (requiring 75% majority) to wind up the company voluntarily.

Step 3 — Appoint a licensed insolvency practitioner

The shareholders appoint a licensed insolvency practitioner (IP) to act as liquidator. The liquidator takes control of the company, realises its assets, pays any remaining creditors, and distributes the surplus to shareholders.

Step 4 — Liquidator distributes funds and closes the company

Once all debts are paid and assets distributed, the liquidator files the final documents with Companies House and the company is dissolved.

What is the Declaration of Solvency?

The Declaration of Solvency is the key document that makes an MVL possible. It is a sworn statement — made under oath in front of a solicitor — in which the majority of directors confirm:

• They have made a full enquiry into the company's affairs
• The company can pay all its debts in full within 12 months
• The attached statement of assets and liabilities is accurate

Making a false Declaration of Solvency is a criminal offence and can result in personal liability for the company's debts.

Getting the Declaration of Solvency witnessed

Each signing director must have their signature witnessed by a solicitor. This can be done via secure video call — no office visit required.

StatDec Hub witnesses Declarations of Solvency via video call at a fixed fee of £100 per appointment. Same-day appointments are available.

Book a Declaration of Solvency appointment

How long does an MVL take?

A straightforward MVL typically takes three to six months from the Declaration of Solvency to final dissolution. The timeline depends on the complexity of the company's affairs and how quickly the liquidator can realise assets and settle any creditor claims.

Summary

Step	Who does it
Declaration of Solvency (LIQ01)	Directors + solicitor witness
Special resolution to wind up	Shareholders
Appoint liquidator	Shareholders
Realise assets, pay debts	Liquidator
Distribute surplus to shareholders	Liquidator
File final documents, dissolve company	Liquidator

If you need a Declaration of Solvency witnessed, StatDec Hub offers same-day video appointments at a fixed fee of £100. Book now.