MVL vs Striking Off: Which Is Right for Your Company?

Key Differences at a Glance

Both an MVL and a company strike off can be used to close a company, but they are designed for different situations. An MVL is a formal liquidation process for a solvent company, while a strike off is an administrative process for removing a company from the Companies Register. Understanding the key differences can help you choose the most appropriate option.

Members’ Voluntary Liquidation (MVL)	Company Strike Off (DS01)
Suitable for a solvent company with retained profits or significant assets.	Suitable for a company that has ceased trading and has no assets to distribute.
Managed by a licensed Insolvency Practitioner.	Applied for directly through Companies House.
Capital distributions may qualify for Business Asset Disposal Relief if the qualifying conditions are met.	Doesn’t offer the same tax advantages as an MVL.
A formal Voluntary Liquidation process.	An administrative process that removes a company from the Companies House register.
Higher costs, but greater tax efficiency in the right circumstances.	Lower cost, but not suitable for every company.

Every company is different, so it’s important to consider your company’s finances, tax position and future plans before deciding which option is right for you.

What Is Company Strike Off (DS01)?

A company strike off is a voluntary process that allows a limited company to be removed from the Companies House register. Company directors apply by submitting form DS01 to Companies House once the business meets the relevant eligibility requirements.

Before making a strike off application, directors should ensure they have:

• Stopped trading or ceased business activities.

• Settled any outstanding liabilities.

• Distributed or disposed of any remaining assets.

• Notified creditors and other interested parties of the proposed strike off.

A company strike off can be a cost-effective way to close a company where there are no significant assets or complex tax implications. However, if the business has retained profits or surplus funds, an MVL may provide a more tax-efficient outcome.

A company strike off isn’t suitable if the business is subject to insolvency proceedings, such as a Company Voluntary Arrangement, or other restrictions that prevent dissolution.

What Is a Members’ Voluntary Liquidation (MVL)?

A Members’ Voluntary Liquidation (MVL) is a formal process used to close a solvent company. It’s used when a company can pay all of its debts, but the shareholders have decided to close the business.

Before the liquidation process can begin, the company’s directors must make a declaration of solvency. This confirms the company can pay its debts, together with any interest, within 12 months. A licensed Insolvency Practitioner is then appointed to manage the liquidation process and distribute the remaining assets.

An MVL is often chosen because it:

• Provides a structured way to close a solvent company.

• Allows company assets to be distributed correctly.

• Can offer tax benefits where the qualifying conditions are met.

• Brings the company’s affairs to a formal conclusion.

When Is an MVL the Better Choice?

An MVL is often the better choice where a company has valuable assets or retained profits that need to be distributed efficiently. Although it involves an additional cost, the tax advantages can outweigh the expense in the right circumstances.

An MVL may be appropriate if:

• Your company is solvent and can pay all outstanding liabilities.

• The company has retained profits or significant assets.

• Tax efficiency is an important consideration.

• Shareholders may qualify for Business Asset Disposal Relief.

• You want a licensed Insolvency Practitioner to oversee the MVL process.

If you’re unsure which option is right for your company, seeking professional advice can help you understand the most suitable route for your circumstances.

The Business Asset Disposal Relief Advantage

One of the main advantages of an MVL is the potential tax efficiency. Where the qualifying conditions are met, capital distributions may qualify for Business Asset Disposal Relief, reducing the Capital Gains Tax payable on qualifying gains.

A company strike doesn’t offer the same tax treatment. In some circumstances, distributions may instead be taxed as income tax rather than capital. If your company has retained profits or significant assets, an MVL could provide a more tax-efficient way to close the company. As eligibility depends on your individual circumstances, it’s important to seek professional advice before making a decision.

Cost Comparison

Members’ Voluntary Liquidation	Company Strike Off
Professional fees apply as a licensed Insolvency Practitioner must manage the process.	Lower costs, with a fee payable to Companies House.
May offer tax benefits that outweigh the additional cost.	Suitable for simpler company closures with no significant assets or retained profits.
Best suited to solvent companies with more complex affairs.	Best suited to straightforward company closures.

Although a company strike is generally the lower-cost option, an MVL can provide greater tax efficiency where the circumstances are right.

Timeline Comparison

Members’ Voluntary Liquidation	Company Strike Off
The timeline depends on the company’s affairs and the liquidation process.	A strike off is often quicker if there are no objections.
A licensed Insolvency Practitioner manages each stage of the process.	Companies House removes the company once the strike off process has been completed.

Although a company strike may be completed sooner, speed shouldn’t be the only factor when deciding which option is right for your business.

Restrictions After Strike Off

Before applying for a voluntary strike off, it’s important to ensure the company meets the relevant legal requirements. Failing to meet your legal obligations before a strike off could, in some circumstances, result in directors being held personally liable for certain losses or obligations.

You should also remember that:

• Creditors can object to a strike off application.

• Any remaining assets may pass to the Crown if they aren’t distributed before dissolution.

• Interested parties may be able to apply for company restoration in certain circumstances.

• Directors remain responsible for meeting their legal obligations before the company is dissolved.

• Outstanding creditor claims can prevent a business from being struck off.

If your company has retained profits, significant assets, potential liabilities or concerns about future claims, an MVL may be the more appropriate option.

Which Situation Applies to You?

Choosing between an MVL and a company strike depends on your company’s circumstances. The following guide can help you identify which option may be more suitable.

A company strike off may be appropriate if:

• Your company has ceased trading.

• There are no significant assets or retained profits.

• All outstanding liabilities have been settled.

• You want a simple, cost-effective way to close the company.

An MVL may be the better choice if:

• Your business is solvent.

• The company has retained profits or significant assets.

• Tax efficiency is an important consideration.

• Shareholders may qualify for Business Asset Disposal Relief.

If you’re unsure which option is right for your business, professional advice can help you make an informed decision.

How Frost Group Handles MVLs?

If an MVL is the right option for your company, Frost Group’s licensed Insolvency Practitioners will guide you through every stage of the process. We’ll explain your options, prepare the necessary documentation and ensure the liquidation is handled correctly.

For free and confidential advice, call 0800 640 9481 during office hours. If you need urgent out-of-hours assistance, you can also contact us on 07714 099 691 to speak with one of our insolvency experts.