Know more about members' voluntary liquidation process which is a voluntary process initiated by the directors of a company willing to wind up.
Liquidation is the process of closing a business and distributing its assets to creditors and shareholders. Liquidation can be voluntary, or compulsory. In the case of voluntary liquidation process, it is initiated by the company’s directors or shareholders. It may be court-ordered in the case of compulsory liquidation. The purpose of liquidation is to dissolve the company, sell its assets, and use the proceeds to pay off its debts in an organised and equitable way. There are two types of voluntary liquidation namely, members’ voluntary liquidation procedure and creditors’ voluntary liquidation. This article explains in detail the members’ voluntary liquidation.
In general, the process of liquidation can be complicated and might take a long time to complete. The specific steps involved will vary depending on the type of liquidation and the laws of the country in which the company is located. However, with the help of Vakilsearch, the liquidation process can be done online and is made smooth and easier. The attorneys at Vakilsearch will keep you informed of all the steps involved and ensure that everything is done at the earliest. They also offer cost-effective options for initiating the online liquidation procedure that will fit your budget.
What Is Members’ Voluntary Liquidation Process?
Members’ voluntary liquidation procedure (MVL) allows a solvent company to be dissolved and its assets distributed to its shareholders. This is a kind of voluntary liquidation procedure that is started by the company’s directors and requires the approval of the company’s shareholders.
Reasons For Members’ Voluntary Liquidation
Members’ voluntary liquidation is typically done when the company is solvent, meaning it is able to pay its debts as they come due. This type of liquidation is made by the company’s directors and shareholders. It is usually done when the directors and shareholders believe that it is in the best interests of the company to wind up its affairs and dissolve the company.
There are a number of reasons why a company’s directors and shareholders might choose to pursue a members’ voluntary liquidation process. The possible reasons may be as follows:
- The company has reached the end of its natural lifespan and is no longer viable.
- The company’s directors and shareholders want to retire or pursue some other business ventures.
- The company has been acquired by another company and is being dissolved as part of the acquisition.
- The company’s directors and shareholders want to reorganise the company’s affairs and start a new business venture.
Difference Between Members’ Voluntary Liquidation And Creditors’ Voluntary Liquidation:
Creditors’ voluntary type of liquidation is also initiated by the company’s directors and shareholders, but it is typically done when the company is insolvent, meaning it is unable to pay its debts as they come due. Whereas members’ voluntary liquidation procedure is initiated by the company’s directors and shareholders and is typically done when the company is solvent, meaning it is able to pay its debts as they come due.
Both are in contrast to compulsory liquidation, which is a court-ordered process that is usually initiated when a company is insolvent (unable to pay its debts as they fall due).
Members’ Voluntary Liquidation Process
The process of members’ voluntary liquidation (MVL) begins when the directors of the company pass a resolution to wind up the company and appoint a liquidator.
Note: A liquidator is an independent, professional individual who manages the liquidation procedure and ensures that the company’s assets are distributed legally and in accordance with the company’s articles of association.
- Once the resolution to wind up the company has been passed, the directors must convene a meeting of the shareholders to seek their approval for the MVL. At this meeting, the directors must provide the shareholders with a statement of the company’s affairs. This must include a report on the company’s assets and liabilities and a statement of the estimated amount that will be available for distribution to the shareholders
- The shareholders must then vote on the resolution to approve the MVL. In order for the MVL to proceed, the resolution must be passed by a majority of the shareholders
- Once the MVL has been approved by the shareholders, the liquidator will take control of the company’s assets and begin the process of realising them (converting them into cash). This may involve selling the company’s assets, such as its property or equipment, or collecting any outstanding debts owed to the company
- The liquidator will also be responsible for paying any outstanding debts that the company owes to its creditors
- Once the liquidator has collected all of the company’s assets and paid its debts, any remaining funds will be distributed to the shareholders in accordance with their entitlements. This process is known as the “final distribution.” The final distribution will usually be made in the form of a cash payment to the shareholders.
The MVL process can be a complex and time-consuming process, and it is important that the liquidator is able to carry out their duties effectively and efficiently. It is also important that the directors and shareholders of the company cooperate with the liquidator and provide them with any information or assistance they require. But, as mentioned earlier, everything with respect to MVL can be done smoothly with the help of Vakilsearch.
Thus, members’ voluntary liquidation process is a useful tool for companies that are no longer required or are no longer viable, as it allows them to be dissolved in an orderly and legally compliant manner. This also ensures that the company’s assets are distributed fairly among the shareholders. To handle the process of liquidation with utmost satisfaction, please check out the website of Vakilsearch or the mobile app and enjoy the quality and affordable service.
- Reasons for a Creditors’ Voluntary Liquidation
- Three Types of Liquidation
- Insolvency of a Private Limited Company
- Closure of Company Under Companies Act 2013