Many of you may have seen the recent High Court ruling on conversion rules in Noal SCSp & Ors v Novalpina Capital LLP & Ors. The judgement confirmed that if a company in a Members’ Voluntary Liquidation (MVL) cannot pay all its debts (including statutory interest) in full within 12 months of entering liquidation, the process must be converted into a Creditors’ Voluntary Liquidation (CVL).
For those who haven’t read the full decision, BRI Business Recovery and Insolvency have identified the key takeaways. If you have any questions or would like more information on an MVL or CVL, please contact our team.
Key Implications of the MVL Conversion Rules
- The “12-month rule” clarified – All debts (plus interest at the official rate) must actually be paid within 12 months, not simply shown as payable in the long term. This is a cash flow test, not just a balance sheet test.
- Scope of debts – The definition includes contingent, prospective, and disputed debts.
- Impact of disputes – Where unresolved claims or ongoing litigation prevent payment within 12 months, the liquidator may be required to convert the MVL to a CVL. In such cases, starting with a CVL may be more appropriate.
- Mandatory conversion – If debts cannot be paid within the timeframe, conversion to CVL is not optional. The liquidator must act without delay.
- No retrospective fixes – Late realisations (such as a property sale or unexpected funding after the 12-month mark) cannot cure the breach.
- Liquidator’s costs included – Fees and winding-up expenses must also be settled within 12 months.
Important Key Point
The requirement to convert does not apply simply because 12 months have passed and realisations are still pending (e.g. awaiting a property sale or a s455 tax refund). The key issue is whether all company debts (including contingent or disputed ones) have been settled within 12 months of appointment.
The team at BRI Business Recovery and Insolvency are here to help. If you find yourself in financial difficulty, please contact our insolvency practitioners today.
What The MVL Conversion Means for Insolvency Practitioners Going Forward
- Suitability checks – Careful assessment of whether an MVL is appropriate before accepting an appointment. This includes a thorough review of financials and liabilities.
- HMRC first – Agreeing and settling HMRC liabilities before appointment will be increasingly important.
- Contingent liabilities – Must be factored into solvency decisions. In some cases, a CVL may be the safer route from the outset.
- Strict monitoring – Progress must be tracked to ensure all distributions, debts, and costs are paid within the deadline.
- Conversion obligations – If deadlines are missed, conversion to CVL must be initiated immediately.
- Clear communication – Shareholders and creditors should be kept informed of emerging risks or delays.
- Ethical and compliance challenges – Conversion may require appointing another IP if the Code of Ethics prevents continuation, and compliance steps such as CDDA returns will apply.
- MVL suitability – For companies with significant contingent liabilities or assets that take longer than 12 months to realise, an MVL may no longer be the right option.
MVL Conversion Ruling: What Happens Next?
An appeal has been filed against this ruling, but it is uncertain whether this will change the position.
However, on 29 August 2025, the IPA (Insolvency Practitioners Association) confirmed that, given the pending appeal, they would be “taking a pragmatic approach in relation to existing MVLs with outstanding debts”. They clarified that where cases have existed longer than 12 months, but “the liquidator is satisfied that there are (or will be within a reasonable time) sufficient realisations to pay any outstanding debts, plus the accruing interest”, then the MVL can last for more than 12 months. This was very much welcomed feedback from our industry regulators. If the Judgement is upheld following the appeal, the IPA will understandably revisit their guidance and the landscape for MVL in the future could permanently change.
BRI Business Recovery and Insolvency took proactive steps prior to the IPA’s announcement to take appropriate advice on individual cases that might be impacted by this judgement and documented our decisions for the file.
Should you wish to familiarise yourself with the MVL process, please click on the link below or give the BRI Business Recovery and Insolvency team a call.
https://www.briuk.co.uk/services/members-voluntary-liquidation/