Members Voluntary Liquidations On The Rise

22 January 2021 
2 minutes
Debt Recovery & Insolvency

The latest Insolvency Service statistics show that in December 2020 there were 9 company insolvencies in Northern Ireland. Only 1 of these was a compulsory liquidation. The latest editions of The Belfast Gazette show a marked increase in the number of Members Voluntary Liquidations (“MVL”), either with the appointment of liquidators or resolutions for voluntary winding up by MVL.

In England & Wales during the same period, there were a total of 1228 company insolvencies of which only 35 were compulsory liquidations, again showing a substantial increase on previous figures. This is the first month in which overall company insolvencies have been higher than the comparable month in 2019 prior to the first UK lockdown. It is evident that Directors, trading through a period of uncertainty, are now taking the initiative with insolvency advice rather than risking a possible compulsory liquidation when the government protections under The Corporate Insolvency and Governance Act 2020 end.

Leaving aside the risk of compulsory insolvency there are other positive advantages in using the MVL process which may explain the increase. Directors may simply have the desire to retire after what has been an incredibly difficult year for business, or to extract cash now following the sale of assets. In turn shareholders may be seeking to seek to extract their investment in a tax efficient manner prior to a possible rate increase in business asset disposal relief in the forthcoming Budget in March.

At MKB Law, our Debt Recovery and Insolvency team advises companies across a diverse range of sectors on MVLs and on other insolvency options such as Administration, Company Voluntary Arrangements and Creditors Voluntary Liquidation. Our Debt Advisory services are also available to Directors who have provided personal guarantees or who are concerned with personally vulnerability for misfeasance or wrongful trading.

Should you require any further information on the above, please contact David McAlinden at MKB Law.

This article is for general guidance only and should not be regarded as a substitute for professional legal advice.

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