MVL vs CVL — solvent or insolvent liquidation?
All creditors paid in full within 12 months. Surplus distributed to shareholders, usually as capital for CGT purposes. Used to close down healthy companies tax-efficiently.
Company cannot pay debts in full. Shareholders resolve to wind up; creditors approve the liquidator. Assets realised and distributed in statutory order — creditors first, shareholders (if anything left) last.
Side-by-side comparison
| Dimension | MVL | CVL |
|---|---|---|
| Solvency status | Solvent — Declaration of Solvency signed | Insolvent — cannot pay debts in full |
| Initiated by | Shareholders (75% special resolution) | Shareholders + creditor approval |
| Statutory declaration required | Yes — sworn by directors | No |
| Who is paid first | Creditors in full with interest, then shareholders | Creditors in statutory order — shareholders usually get nothing |
| Typical use case | Retirement, business sold, group tidy-up | Trading has failed, no rescue route viable |
| Tax treatment for shareholders | Capital treatment; may qualify for BADR at 10% | Capital treatment but usually nothing to distribute |
| Duration | 4–9 months | 6–24 months |
| Director personal risk | Low if the declaration is honest | Moderate — subject to Insolvency Service scrutiny |
| Cost | £1,500–£5,000 for simple; more for complex | £3,000–£20,000+ depending on asset complexity |
The two paths, step by step
- 1. Directors review balance sheet and confirm solvency.
- 2. Directors swear the Declaration of Solvency before a solicitor.
- 3. Shareholders pass a special resolution to wind up.
- 4. Liquidator appointed; Companies House and Gazette notified.
- 5. Assets realised, creditors paid in full with statutory interest.
- 6. HMRC clearance obtained.
- 7. Final distribution to shareholders (capital treatment).
- 8. Dissolution after final meeting.
- 1. Directors take insolvency advice; conclude company can't be saved.
- 2. Board resolution and 14 days' notice to shareholders.
- 3. Shareholders pass winding-up resolution.
- 4. Creditors approve appointment of liquidator (virtual meeting or deemed consent).
- 5. Liquidator investigates directors' conduct and prior transactions.
- 6. Assets realised, distributions made per statutory order.
- 7. Liquidator files final report to creditors.
- 8. Dissolution and strike-off.
Read next
Frequently asked questions
What is an MVL?
A Members' Voluntary Liquidation — a formal winding-up of a solvent company. The directors sign a statutory declaration that the company can pay all its debts (plus interest) within 12 months, and a liquidator is appointed to distribute the surplus to shareholders.
What is a CVL?
A Creditors' Voluntary Liquidation — a formal winding-up of an insolvent company, initiated by the shareholders and approved by the creditors. A liquidator realises assets and distributes to creditors in statutory order.
Is a CVL the same as a compulsory liquidation?
No. A CVL is voluntary — the shareholders and creditors elect to wind up. A compulsory liquidation follows a court winding-up order (usually on a creditor's petition). The end state is similar but the process, appointment and cost are different.
What is a Declaration of Solvency?
The document at the heart of an MVL. Directors swear that they have made a full enquiry into the company's affairs and that the company will be able to pay its debts in full, plus statutory interest, within 12 months. Making one recklessly is a criminal offence.
What tax treatment applies in an MVL?
Distributions to shareholders in an MVL are usually treated as capital rather than income, which — subject to HMRC's Targeted Anti-Avoidance Rule — often qualifies for Business Asset Disposal Relief (formerly Entrepreneurs' Relief) at 10% up to the lifetime limit. Take specific tax advice.
Can an MVL turn into a CVL?
Yes. If, during the MVL, the liquidator forms the view that the company cannot in fact pay its debts in full within 12 months, they must call a creditors' meeting and convert to a CVL. Directors then risk personal exposure for making a false Declaration of Solvency.
How long does each take?
An MVL: 4–9 months typically, longer if HMRC clearances are outstanding. A CVL: 6–24 months depending on asset realisation complexity.
Who can act as liquidator?
In both cases, only a licensed insolvency practitioner regulated by a Recognised Professional Body.