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New Insolvency Service study: what it really tells us about MVLs and the 12-month rule
If you advise owner-managed companies, you may have fielded questions this year about the High Court ruling on Members' Voluntary Liquidations, specifically, the interpretation that all creditors, plus statutory interest, must be paid within 12 months of the liquidation commencing. The decision is under appeal, but in the meantime, it has caused genuine uncertainty across the insolvency profession about whether the MVL remains a safe route for closing a solvent company.
A new study commissioned by the Insolvency Service, published in June 2026, is the first large-scale analysis of MVL outcomes in England and Wales - and it should give accountants and advisers considerable comfort.
What the study found
The research examined 2,309 MVL cases between 2016 and 2024. The headline findings:
- Creditors were paid in full within 12 months in 95% of closed cases.
- Cases where creditors remained unpaid beyond 12 months were rare.
- Only 7 of 2,309 cases converted from MVL to Creditors' Voluntary Liquidation, and just one of those led to a director disqualification.
In other words, the declaration of solvency regime is doing its job. Directors are, overwhelmingly, making accurate declarations, and the process is delivering exactly what it is designed to deliver: an orderly, tax-efficient exit for solvent companies with creditors paid in full.
The point everyone gets wrong about the 12-month rule
A common misconception we encounter is that an MVL must conclude within 12 months. It does not, and the Insolvency Service has restated this explicitly alongside the research. The statutory requirement under scrutiny in the current litigation concerns payment of creditors within 12 months. There is no time limit on distributions to members. A liquidation can, and often does, remain open beyond 12 months where there are good reasons (e.g. pending deferred consideration, earn-outs, or contingent liabilities) without the company's solvent status being in doubt, provided creditors have been dealt with.
What this means for your clients while the appeal is pending
Until the appeal is decided, the prudent approach is to assume the 12-month creditor payment requirement stands, and to plan around it. In practice that means:
- Quantify the final tax position early. The corporation tax liability for the period to cessation should be established as soon as possible (ideally with the accounts and computations prepared before the winding-up resolution). This keeps the creditor position straightforward and capable of being resolved well within the 12-month window.
- Early distributions still work. Where shareholders provide an indemnity (with an appropriate retention held back for known and estimated liabilities), the bulk of the funds can be distributed early in the liquidation. Clients are not waiting 12 months for their money; the tax is settled in the background from the retention.
- Remember statutory interest. Any liability settled late in the liquidation accrues statutory interest at 8% from the date of liquidation, irrespective of the normal due date. On a sizeable corporation tax bill, that adds up quickly. Early quantification and payment is not just compliant; it is cheaper.
- Don't let the ruling put clients off. The study confirms what practitioners already knew: MVLs work, creditors get paid, and abuse is rare. For a solvent company at the end of its life, the MVL remains the right vehicle: the ruling changes the timetable discipline, not the fundamentals.
Our national dedicated team deals exclusively with MVLs, including the more complex cases - s.455 loan account issues, distributions in specie, deferred consideration, earn-outs, etc. If you have a client weighing up an MVL against a strike-off, or a case complicated by the 12-month question, we are happy to talk it through before you refer.
The full study, Members' Voluntary Liquidations: A Statistical Review of MVL Practice and Outcomes, is available on GOV.UK.
If a client is considering a solvent liquidation and you would like to discuss it then please call your local LC contact or message Steve direct on steve.markey@leonardcurtis.co.uk.
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