What Is The Duration Of A Member’s Voluntary Liquidation?

Written By: Bobby Dazzler on December 25, 2009 No Comment

A Members’ Voluntary Liquidation is amongst the many liquidation processes, which come under the Insolvency Act of 1968. It is a procedure for liquidation of those companies, which are solvent.

Usually, liquidation is taken as a last step for those companies, which are insolvent and can no longer pay their debts. When such a situation is reached, the company liquidates, and its assets are sold off to pay the debts. However, it is not necessary that the company be insolvent to be liquidated.

In the case of the member’s lack of will to continue the operations of the company, a VML is a viable option to opt. In addition, losses for a company or indecision regarding its future can also validate VML. Nevertheless, a compulsory liquidation is the complete opposite of a VML. Nevertheless, this applies only to those companies who have enough wealth to pay off their debts that is the company must be solvent, and should pay its debt within one year.

The liquidation process starts with a formal resolution to wind up the company. This resolution is made at a company meeting where the financial position of the company is discussed. At this board meeting, a resolution of the board is taken in which, it is decided whether it is viable to liquidate or not. The decision to appoint a nominated liquidator is also taken. The resolution will be passed only if seventy five percent of the members agree to it.

Within five weeks of the resolution, the production of a formal Declaration of Solvency becomes due. This is actually documented evidence reflecting the position of solvency that the company is in, containing details about the assets, and liabilities of the company. A maximum of 12 months is required, in which the company is deemed eligible to pay its creditors together with a statutory interest, a hassling penalty for the agility of the procedure.

Once the legal procedures have been taken care of, the liquidator is to value the assets of the company, either selling them off, or distributing them amongst shareholders, and members. In addition, the appointment of the liquidator nullifies the authority of the directors despite the obligation for their consultation in all matters. This MVA process lasts a duration that is required to finish the aforementioned legal proceedings.

For shareholders, an MVA is beneficial in the light of getting their investments repaid that went in the establishment of the business. Either the distribution of the assets takes place or the assets are sold, and the liquidator distributes the resulting cash.

However, the ability of the company to pay its debt within a year should be made sure of along with the validity of its solvency status. During the entire course of the liquidation process, if the company is found to be in an unstable financial position, there is always a danger for the directors to be facing legal action, and being taken to court.

Bobby Dazzler is a financial consultant. You can take his advice on members voluntary liquidation and complete information about cva at his recommended website at http://www.beesley.co.uk.