A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
CVL vs MVL: What's the Difference?
Creditors' Voluntary Liquidation (CVL) and Members' Voluntary Liquidation (MVL) sound similar, but they serve completely different purposes. The key distinction is whether the company is insolvent or solvent.
At a Glance
| CVL | MVL | |
|---|---|---|
| Company position | Insolvent - cannot pay debts | Solvent - can pay all debts in full |
| Purpose | Close an unviable company | Close an unneeded company efficiently |
| Declaration of solvency | No | Yes - required |
| Tax treatment of distributions | Unlikely to matter | Capital - major tax saving |
| Director conduct investigation | Yes - routine | Minimal |
| Cost | From around £3,000 to £5,000 + VAT | From around £2,000 to £4,000 + VAT |
When to Use a CVL
A CVL is for companies that cannot pay their debts. It is the responsible way to close an unviable business, realise assets, and distribute proceeds to creditors. Directors avoid the risks of compulsory liquidation and demonstrate they have acted responsibly.
When to Use an MVL
An MVL is for solvent companies - typically where directors are retiring, restructuring, or winding down a company that is no longer needed. The main reason to choose an MVL is tax efficiency: distributions are treated as capital, potentially qualifying for Business Asset Disposal Relief at 10%, rather than as dividends taxed at income rates.
The Declaration of Solvency
The defining feature of an MVL is the Declaration of Solvency - directors must swear that the company can pay its debts in full, with interest, within 12 months. Signing it without genuine grounds is a serious offence. A CVL requires no such declaration, because the company is insolvent.
Choosing the Right Route
If your company is insolvent, an MVL is not an option - you cannot sign a Declaration of Solvency. If your company is solvent but has under £25,000 in reserves, a simpler strike-off may be more appropriate than an MVL.
Speak to a Licensed IP
Our Manchester-based practitioners will tell you honestly whether a CVL, an MVL, or a simpler alternative is right for your company.