Winding up a company: a comparison of members’ voluntary liquidation vs strike-off
The two ways for a solvent company to voluntarily dissolve is to do so by members’ voluntary liquidation (MVL) or by applying to the Registrar of Companies to have the company struck off the register. Both avenues have their advantages and disadvantages and will depend on a variety of factors such as the structure of the solvent company; the reasons for the winding up; and tax efficiency.
An MVL begins with more than 75 per cent of the shareholders passing a resolution to wind up the company. Therefore, if there are dissenting shareholders who do not agree with the proposal, the company will hit difficulties at the first hurdle. If the resolution is passed, the directors of the company will be required to swear a statutory declaration of solvency. This states that, following a full investigation of the company’s affairs, the directors are confident that the company will be able to pay its debts in full (along with any interest) within a specified period not exceeding 12 months from the start of the winding up of the company. The directors must be very careful before making such a statement as to incorrectly do so is a criminal offence…
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