Members' Voluntary Liquidation (MVL) Solicitors

The liquidator’s function is to collect in and realise the company’s assets and to distribute the proceeds to the company’s creditors and, if there is a surplus, to its members/shareholders. 

Liquidators have wide powers to enable them to perform their functions and these are set out in the Insolvency Act 1986 and include the power to:

• Pay any class of creditors in full.
• Make any compromise or arrangement with creditors.
• Compromise liabilities owing to the company, take security for the discharge of such liabilities and compromise all questions relating to or affecting the assets or the winding up of the company.
• Bring legal proceedings under the Insolvency Act 1986.
• Bring or defend any action or other legal proceedings in the name and on behalf of the company.
• Carry on the business of the company so far as may be necessary for its beneficial winding up.
• Sell any of the company’s property by public auction or private contract, in whole or in part.
• Do all acts and execute documents in the name and on behalf of the company and to use the company’s seal.
• Raise money on the security of the assets of the company.
• Appoint an agent to do any business which the liquidator is unable to do themself. 
• Do all such other things as may be necessary for winding up the company’s affairs and distributing its assets.

The liquidator's fees are generally paid as an expense of the winding up.  They are therefore typically paid out of the company's assets, after secured creditors holding fixed charge security have been paid but in priority to creditors who either have no security or have floating charge security over the company's assets.  The rules relating to how the liquidators’ fees may be fixed are set out in the Insolvency (England and Wales) Rules 2016. 

In an MVL, the company is solvent and the creditors should be paid back in full (the only exception to this is in respect of contingent liabilities that crystallise after the start of the MVL which may not be paid in full if the liability was previously estimated at a lower value by the liquidator).  Therefore, the creditors are not involved in an MVL and there is no need to seek any decisions from the creditors.

If a creditor has the benefit of security, the creditor is entitled to be paid from the proceeds of sale of the secured assets, subject to certain exceptions. 

Creditors may be required to provide the liquidator with details of their claim against the company (known as a proof of debt).  Because an MVL is a solvent liquidation, the liquidator will not always require a proof of debt to be submitted and in some cases (such as where the debt is £1,000 or less) a creditor may be deemed to have proved the debt.  The liquidator will assess all proofs of debt. and may either accept a claim in whole or part or may reject it.

There is no automatic stay on proceedings against a company in MVL.  However, the court may order that any proceedings are stayed under its general, discretionary power contained in the Insolvency Act 1986.

In an MVL, the company is solvent and so, typically, the liquidator will make a return of capital or of assets in specie to the company's members.

The members are able to exercise certain rights if they are concerned about how the liquidator is handling the MVL.  For example, members may be able to challenge the level of the liquidator's remuneration. 

Members are entitled to receive reports on the progress of the liquidation from the liquidator. 

The responsibility for assessing the company’s financial position and its solvency is placed firmly on the directors (or a majority of them). They must make the statutory declaration for the winding up to come under the control of the members and, if not, the creditors will determine the choice of liquidator in a creditors' voluntary liquidation.

When a company goes into MVL, the directors’ powers automatically cease, except so far as the liquidator or the members in general meeting consent to the continuance of those powers (and how they will be exercised).

Provided the company is actually solvent when it goes into MVL, the liquidator does not have a duty to report on the directors’ conduct pursuant to the Company Directors Disqualification Act 1986.  However, other offences and penalties can still apply in relation to director malpractice where the company is solvent.  

We acted for a travel company which brought a claim against the Royal Bank of Scotland (RBS) in respect of negligent advice provided on interest swap agreements entered into between our client and the bank.  During the course of the proceedings against the bank, our client decided to place the company into Members’ Voluntary Liquidation. 

We advised our client on how the court proceedings against the bank would be affected by placing the company into MVL. 

We also assisted the liquidators with the information they required in order to deal with the liquidation.  Ultimately, our client agreed to settlement terms with RBS in order to bring the court proceedings to an end so that the liquidation of the company could be completed and the company dissolved.