Step 1: Complete a formal Declaration of Solvency
Before an Insolvency Practitioner (IP) can be appointed, the directors must complete a formal Declaration of Solvency. This confirms that the company can repay all its debts, including interest, in full within 12 months of commencing the liquidation process.
Step 2: Appointment of a licensed Insolvency Practitioner
A Members’ Voluntary Liquidation (MVL) begins with the appointment of a licensed Insolvency Practitioner, who acts as the liquidator. The liquidator takes control of the process, which involves formally winding-up the company. This includes ceasing all trading and business operations. To proceed, at least 75% of the company’s shareholders (by value) must vote in favour of the MVL to pass a Special Resolution to wind up the company; if this threshold is not met, alternative options must be considered.
Step 3: Remaining funds are distributed
The appointed Insolvency Practitioner is responsible for selling the company’s remaining assets. The proceeds are first used to pay off any outstanding creditors. Once all liabilities have been settled, the remaining funds are distributed amongst the shareholders.
Step 4: Company is removed from Companies House register
Following the completion of the liquidation and final distributions, the company is formally removed from the Companies House register. At this point, it ceases to exist as a legal entity.
How long does the process take?
The process usually takes several months, depending on how complex the company’s affairs are. This includes the time required to appoint an Insolvency Practitioner and to identify all known and potential (contingent) liabilities.
