Members’ Voluntary Liquidation | What is it and how does it apply to me?

Aug 11, 2022

There are various ways to wind up or liquidate a limited liability company. Each method will essentially realise the assets of the company and distribute the proceeds to the company’s creditors or shareholders, but they are individually unique as to the processes that need to be followed.

One such method is a Members’ Voluntary Liquidation.

What is a Members’ Voluntary Liquidation?

Under a Members’ Voluntary Liquidation, the shareholders of a company themselves resolve to wind-up the company with an insolvency practitioner then being appointed as liquidator.

This liquidator will then realise and distribute the company’s assets to its creditors and shareholders before striking the company off the register.

What is the process that needs to be followed?

Contrary to other forms of liquidation, a company cannot be insolvent for a Members’ Voluntary Liquidation to apply. In fact, not more than five weeks before the shareholders resolve to place the company into Members’ Voluntary Liquidation, the directors must issue a “statutory declaration of solvency”.

This statutory declaration of solvency must state that the directors have made a full inquiry into the company’s affairs and are satisfied it is in a position to pay its debts in full.

Consequently, the creditors need not be involved in the winding-up process directly as they will be paid in full following the realisation of the company’s assets.

What does this mean for me as a director?

Provided that the directors have complied with their duty to assess the solvency of the company, the only consequence for them (in relation to the Members’ Voluntary Liquidation) will be that their powers will automatically cease (unless the liquidator states otherwise) once the liquidator has been appointed.

If, however, the liquidator is of the opinion that the directors failed to satisfy their duty to assess the solvency of the company, disciplinary procedures may be commenced and legal advice should be sought.

What does this mean for me as a shareholder?

Aside from resolving to place the company into Members’ Voluntary Liquidation, there is little to do for a shareholder once the liquidator is appointed, other than to receive any payment of surplus assets once the creditors have been repaid in full.

The above only provides a brief and generic overview of Members’ Voluntary Liquidations, and professional advice should be sought (including from solicitors, accountants and insolvency practitioners) before any steps are taken to wind-up a company.

How we can help

Here at Herrington Carmichael, one of our specialisms is assisting with the legal and procedural aspects of corporate insolvency, including Members’ Voluntary Liquidations. If you require further advice regarding any corporate insolvency matter in respect of your business, please contact Edward Beedham in our Corporate department. You can also email your query to edward.beedham@herrington-carmichael.com, call 01276 686222.

This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to your own particular matter before action is taken.

Edward Beedham

Edward Beedham

Solicitor, Corporate and Commercial
 01276 854666
e: edward.beedham@herrington-carmichael.com

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