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

If a UK limited company can pay all its debts and you want to close it, a Members' Voluntary Liquidation (MVL) is usually the most tax-efficient route. It starts with the directors swearing a Declaration of Solvency in front of a solicitor, after which the shareholders resolve to wind the company up and appoint a liquidator.

What is a Members' Voluntary Liquidation?

An MVL is a formal process for winding up a solvent limited company, meaning 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 served its purpose and is no longer needed
• Shareholders want to close the company in the most tax-efficient way available

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

When is an MVL worth it?

An MVL is usually worth considering when a solvent company has retained profits of £25,000 or more. Below that figure, the cost of the process may outweigh the tax benefit, and striking off may be more practical.

Speak to an accountant or tax adviser before you start, to confirm whether an MVL suits your circumstances.

What are the steps in an MVL?

1. The directors make a Declaration of Solvency

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

2. The shareholders pass a winding-up resolution

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

3. A licensed insolvency practitioner is appointed

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

4. The liquidator distributes funds and closes the company

Once all debts are paid and the 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 document that makes an MVL possible. It is a statement made under oath in front of a solicitor, in which a majority of the directors confirm that:

• 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 lead to personal liability for the company's debts.

How is the declaration witnessed?

Each signing director must have their signature witnessed by a solicitor, and this can be done by video call. The director shows a passport or driving licence, signs the form live on the call without having signed it beforehand, and then emails the signed form to the solicitor. The solicitor countersigns it and emails it back, usually the same day, ready to pass to the insolvency practitioner. Nothing is posted.

StatDec Hub charges £100 per document for this, and same-day appointments are available.

How long does an MVL take?

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

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