MVL or strike off: what’s the best way to close your company?

When winding up a solvent company, there are two options: voluntary strike off or Members’ Voluntary Liquidation (MVL). Both offer a way to close the business, but they differ significantly in tax treatment, creditor protection, cost, speed and certainty.

The right choice depends on factors like your company’s solvency, retained profits and assets and the risk of historic liabilities.

What is an MVL?

An MVL is a formal insolvency process governed by the Insolvency Act 1986 and Companies Act 2006 (CA 2006).

Directors make a declaration of solvency confirming all liabilities (including interest) can be paid within 12 months. Shareholders then pass a special resolution to wind up and appoint a licensed insolvency practitioner as liquidator.

The liquidator sells assets, pays creditors in full, resolves matters with HMRC and distributes any surplus to shareholders. The company is dissolved once Companies House filings are complete.

When properly planned and executed, an MVL is often faster, more tax‑efficient and more robust than strike off where there are material assets, contingent liabilities or multiple stakeholders. Crucially, any creditor claims are against the liquidator rather than the company or its directors, providing an extra layer of protection.

What is a voluntary strike off?

Strike off is an administrative process under the CA 2003 to remove a company from the Companies House register. It’s only available in certain circumstances, for companies that haven’t traded, changed name or disposed of key assets recently, and have no ongoing insolvency or legal proceedings.

Directors file Companies House form DS01, which is advertised in the Gazette. If there are no objections, the company is struck off.

The process is low-cost and straightforward but offers limited protection for companies and directors. Creditors or other stakeholders can object and the company can be restored to the register for several years after dissolution. Any undistributed assets at the time of dissolution could pass to the Crown as bona vacantia.

Pros and cons

Decision checklist

1. Solvency and certainty: can the board confirm all liabilities (including interest and potential future claims) will be settled within 12 months? If not, MVL isn’t available.
2. Liabilities and risk: are there warranties, tax issues, leases, pensions, environmental concerns or other potential liabilities? If so, MVL provides a safer, more structured approach.
3. Stakeholders and complexity: are there multiple shareholders, employee share schemes, secured creditors, overseas assets or regulatory hurdles? MVL can help manage these complexities more effectively.
4. Timing and budget: is your main goal to minimise cost and time for a dormant company with minimal assets? If so, strike off might be appropriate.
5. Residual assets: are there any remaining assets, such as property, intellectual property, cash or intercompany balances? If so, strike off might risk these assets passing to the Crown as bona vacantia.
6. Future claims: how important is finality versus the risk of company restoration for several years after dissolution? MVL provides more certainty.

Conclusion

The decision between an MVL and strike off depends on your company’s circumstances. If there are significant assets, complex liabilities or multiple stakeholders, an MVL provides a more secure, tax-efficient and well-structured exit route. For dormant companies with minimal assets and no ongoing liabilities, strike off offers a quicker, more cost-effective solution.

Carefully assessing the company’s solvency, liabilities and the potential for future claims is key to making the right choice. Whatever route you choose, seek professional advice to minimise risk and maximise benefits for all stakeholders.