What is a solvent liquidation?
A solvent liquidation, also known as a Members’ Voluntary Liquidation (MVL), is the formal process of voluntarily winding up a company that is able to satisfy all its debts in full within a specified period, typically within 12 months.
What is the difference between solvent and insolvent liquidation?
A solvent liquidation occurs when a company is able to pay all its debts in full. In contrast, an insolvent liquidation arises when the company is unable to meet its debts as they become due, necessitating either a Creditors’ Voluntary Liquidation or a court-ordered winding-up.
When should a company consider a solvent liquidation?
A company should consider a solvent liquidation when it has accomplished its intended objectives or is no longer required, and all debts and obligations can be settled in full. Typical scenarios include group restructuring, retirement of business activities, or distribution of assets to shareholders.
Who appoints the liquidator in a solvent liquidation?
The liquidator in a solvent liquidation is appointed by the shareholders through the passage of a special resolution at a duly convened general meeting.
Can the directors act during the liquidation?
Upon the appointment of a liquidator, the directors’ powers cease, and the liquidator assumes full control over the affairs and operations of the company.
