MVL study backs solvent closure process

The Insolvency Service has published the first large-scale empirical analysis of Members’ Voluntary Liquidations in England and Wales, finding that the process is operating effectively in almost all cases examined.

The study reviewed 2,309 Members’ Voluntary Liquidation cases between 2016 and 2024. An MVL is a formal process used by solvent companies that have reached the end of their useful life, allowing them to close in an orderly way while paying creditors in full.

The research found that creditors were paid in full within 12 months in 95% of closed cases examined. Cases where creditors remained unpaid beyond 12 months were rare. Only seven of the 2,309 cases converted from MVL to Creditors’ Voluntary Liquidation, with one of those leading to director disqualification.

The Insolvency Service commissioned the study to improve understanding of the MVL landscape and assess the potential effect of a recent High Court ruling that interpreted the law as requiring all creditors and interest to be paid within 12 months of an MVL’s commencement. The case is currently subject to appeal.

Claire Hardgrave, co-director for strategy, policy and analysis at the Insolvency Service, said the research provided “the clearest picture to date” of how MVLs operate in practice.

The findings are relevant to directors, insolvency practitioners, accountants, tax advisers, shareholders, and creditors because MVLs are commonly used where a solvent company needs to be wound up after the end of a project, retirement, restructuring, sale preparation, or group simplification.

Unlike an insolvent liquidation, an MVL depends on directors confirming that the company can meet its liabilities within the statutory timeframe. A licensed insolvency practitioner is then appointed to realise assets, settle liabilities, and distribute surplus funds to shareholders.

The study gives the market evidence that the MVL process is usually performing as intended. Insolvency statistics often focus on distress, creditor losses, director misconduct, and rising failure rates. MVLs sit in a different part of the corporate lifecycle: planned closure rather than business collapse.

Advisers can use the data as support for the continued use of MVLs as a structured route for solvent closure, but careful pre-liquidation work remains essential. Directors still need accurate management accounts, creditor schedules, tax estimates, contingent liability assessment, and a clear understanding of whether the business is genuinely solvent.

Tax planning is often a major driver. MVLs can be relevant where shareholders are extracting value from a solvent company and want an orderly distribution route. Accuracy and timing are therefore critical, particularly where HMRC liabilities, interest, employee obligations, leases, warranties, litigation, or uncertain claims could affect the company’s ability to pay creditors in full.

The finding that only seven cases converted to Creditors’ Voluntary Liquidation is reassuring, although those exceptions show why directors must be cautious. A company entering MVL on an overly optimistic assessment of solvency can create personal, regulatory, and reputational risk. Insolvency practitioners will also remain alert to transactions, creditor claims, and late-emerging liabilities.

The research comes as UK companies continue to face cost pressure, financing constraints, tax complexity, and succession decisions. Some directors may choose to close solvent companies rather than continue trading in lower-margin conditions, while others may simplify group structures after acquisitions or project completion.

Tax and compliance administration is also becoming more structured. In HMRC phases benefits payrolling rollout, payroll changes showed how directors and finance teams increasingly need cleaner records, stronger advice, and reliable process control. MVLs depend on the same discipline.

The wider policy question is confidence in the insolvency framework. A solvent closure route that pays creditors in full and returns surplus value efficiently supports business dynamism, because companies can be wound down without treating every closure as failure. That allows entrepreneurs, investors, and directors to move capital, time, and expertise into new activity.

The Insolvency Service said it will continue to monitor the landscape. The appeal linked to the High Court ruling means the legal position may still develop, but the study gives policymakers and advisers a stronger evidence base for assessing whether reform is needed.