Solvent Liquidation: Can I Wind Up My Company Even If It’s Not Insolvent?

Many directors contact us because they want to bring their company to a natural, orderly end, even though it is still solvent. You may be retiring, no longer wish to trade, have completed a one-off project, or simply feel the business has reached the end of its useful life. Whichever reason is prompting you to think about a solvent liquidation, there may still be retained profits or assets that need to be distributed in a structured and tax-efficient way. And to close it properly, the law requires a formal process; it cannot simply be abandoned or left to drift. This is where BRI Business Recovery and Insolvency can help.

At BRI Business Recovery and Insolvency, we can guide you through the correct route of solvent liquidation, ensure all obligations are met, and help you achieve the outcome you are looking for.

Why A Company Cannot Simply “Stop Trading”

A limited company remains a legal entity until it is formally wound up and/or dissolved. Until that point, the directors must ensure that:

• All creditor liabilities are met
• All statutory returns (including HMRC filings and Companies House) are submitted on time
• Company assets are properly dealt with i.e. insured and protected

Failing to follow the correct procedure can result in delays, penalties, unexpected tax liabilities, or objections at Companies House.

This is why directors wishing to wind up a company that isn’t insolvent and with distributable reserves often undertake a Members’ Voluntary Liquidation (MVL). It is a legally recognised and often tax-efficient way to close a solvent company.

The Correct Way to Wind Up a Solvent Company: Members’ Voluntary Liquidation (MVL)

A Members’ Voluntary Liquidation (MVL) is a formal process used to close a solvent company. It is initiated by the directors and shareholders and is overseen by a licensed insolvency practitioner.

An MVL is often chosen for:

• Retirement
• Restructuring or simplification
• Realising long-term retained profits
• Closing after selling a trade or assets
• Companies created for a specific project that has now finished
• Groups looking to close dormant or surplus subsidiaries

For most owners, an MVL is the most efficient route for winding up a company that isn’t insolvent.

In Simple Terms, How an MVL Works

1. Declaration of Solvency – Directors swear a statutory declaration confirming the company can pay all liabilities plus interest within 12 months from date of liquidation.
2. Appointment of Liquidators – At BRI Business Recovery and Insolvency, we prepare all the paperwork and guide you through the process of placing the company into MVL via a board meeting and general meeting approving resolutions.
3. Settlement of Liabilities – Creditors should usually already have been settled save for any final HMRC taxes that may need to be dealt with.
4. Distribution to Shareholders – Remaining cash or assets can then be distributed. This is commonly more tax-efficient than paying dividends in the ordinary course of business.
5. Dissolution – Once complete, the company is dissolved and removed from the register.

One key benefit of an MVL is the potential eligibility for Business Asset Disposal Relief, which can reduce the tax payable on the distribution of funds.

Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief) is a tax relief that may reduce the amount of Capital Gains Tax payable when shareholders receive distributions from a solvent liquidation. If the qualifying criteria are met, gains are taxed at a reduced rate rather than standard capital gains tax rates, which is why an MVL is often the most tax-efficient method of extracting the remaining value from a solvent company.

Can a Solvent Company Use Compulsory Winding Up Instead?

Technically, directors can petition the court to wind up a solvent company, but this is rare and usually unnecessary. A compulsory liquidation is designed for insolvent companies and not solvent companies.  It is typically initiated by creditors, not directors.

What If the Company Is Borderline Solvent?

Some companies are in a position where they can repay creditors but may not need an MVL and they can explore a strike off. This avoids the need for a liquidation and the company goes directly to dissolution.

If there is a risk that creditors cannot be paid in full then we would need to discuss the company’s position to discuss the options available.

Why Early Professional Advice on Solvent Liquidation Matters

Winding up a company that isn’t insolvent is often straightforward with the right advice, but there are legal obligations to meet. Speaking to an insolvency specialist early ensures:

• Directors fulfil their statutory duties
• All creditors are properly settled
• Funds are extracted tax-efficiently
• The correct procedure is followed
• The company closes cleanly, without risk or delay

When you work with BRI Business Recovery and Insolvency, we take the pressure off your directors and can handle the entire process, from preparation through to dissolution.

BRI Business Recovery and Insolvency Are Here to Help You

We are an independent, employee-owned insolvency practice with extensive experience in solvent closures. If you are thinking about winding up a company that isn’t insolvent, we can:

• Explain your options clearly
• Prepare the Declaration of Solvency
• Manage every stage of an MVL
• Work with your advisers
• Support directors from start to finish

Thinking of Winding Up Your Solvent Company? Contact Us Today

If you are considering closing your company, whether due to sale, retirement, restructuring or any other reason please contact BRI Business Recovery and Insolvency. We are here to help you understand the right process for your situation.

The initial consultation is free of charge and without obligation.