What is a members' voluntary liquidation and when is it typically used?

Copyright © 2025 LexisNexis
Produced in partnership with Simon Hunter of Three Stone
Practice notes

What is a members' voluntary liquidation and when is it typically used?

Copyright © 2025 LexisNexis

Produced in partnership with Simon Hunter of Three Stone

Practice notes
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Members’ voluntary liquidation

Voluntary liquidation or winding-up is a process in which the company, through the resolution of its members, decides to end the activities of the company and move towards the eventual dissolution of the company.

There are two kinds of voluntary liquidation:

  1. •

    members’ voluntary liquidation (MVL), where the company is solvent and the members retain the majority of the control, and

  2. •

    creditors’ voluntary liquidation (CVL), where the company is insolvent and the creditors take the majority of the control

The difference between the two types of voluntary liquidation is whether the directors believe that the company is able to pay all its debts in full, with interest at the official rate, within a period not exceeding 12 months from the commencement of the winding-up. If they do believe this, they state it in a declaration of solvency and can place the company into MVL. If not, it must enter CVL. For further information, see Practice Note: What is a statutory declaration of solvency

Simon Hunter
Simon Hunter

Three Stone

Simon was called to the Bar in 2009 and practices in chancery and commercial law from Three Stone. His practice has a particular emphasis on insolvency and property, but takes in the full range of chancery and commercial work done in his chambers.

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Jurisdiction(s):
United Kingdom
Key definition:
Voluntary liquidation definition
What does Voluntary liquidation mean?

liquidation not involving the court, either members voluntary liquidation (MVL) for solvent companies, or creditors voluntary liquidation (CVL) for insolvent companies.

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