Members’ Voluntary Liquidation (“MVL”)
A members’ voluntary liquidation (MVL) can only be instigated when a company is solvent and has sufficient funds to meet its financial obligations including the winding up expenses. A liquidator will be nominated by the board of director and appointed by the shareholders to wind up the company’s affairs. Necessary notifications required under the Companies Act 2016 will be lodged with the SSM and the Official Receiver. The assets of the company will be realised and full payment to creditors will be made. Any surplus of funds thereafter will be returned to the shareholders. The entire members’ voluntary liquidation process may take about 1 to 2 years to complete and it very much depends on the receipt of official clearance from the relevant authorities.
Causes of Members’ Voluntary Liquidation
When a company has achieved all of its objectives or the reason to remain open is no longer valid. The members may then decide to wind up the company by selling all of its assets and distributing any surplus after payment of liabilities to the shareholders. It can also be used to reorganize a group of companies, such as if a subsidiary company is no longer required or non-performing or has served its purpose. Whatever the objective, by proceeding with a members’ voluntary liquidation, the directors are able to wind-down the company in the most efficient manner possible.
What is The Distinction Between an MVL and a CVL?
CVL occurs when the directors of an insolvent company choose to liquidate the company voluntarily rather than waiting for a compulsory liquidation. While MVL is whereby a solvent company chooses to cease its operations, wind-up the company and returning surplus fund (if any) to the shareholders.
Impacts of Members’ Voluntary Winding Up
The main advantage of liquidating a company through a members’ voluntary liquidation is the ability to return the surplus fund to shareholders upon realisation of company’s assets. Once the liquidator has obtained clearance from the relevant authorities and ensured that there are no further claims from any other creditors, the appointed liquidator will take steps to close the case. Upon the final meeting of the company, the process of members’ voluntary winding up will come to an end, relevant documents will be lodged and the company will be deemed dissolved.
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