What is the key difference between a Members' Voluntary Liquidation (MVL) and a Creditors' Voluntary Liquidation (CVL)?

Answer options:

An MVL is initiated by the court, while a CVL is initiated by the creditors.

In an MVL, the directors must make a statutory declaration of solvency; in a CVL, the company is insolvent.

An MVL applies only to public companies, while a CVL applies to private companies.

The liquidator in an MVL is appointed by the court, whereas in a CVL they are appointed by the members.

How to approach this question

Distinguish between solvent and insolvent voluntary liquidations.

Full Answer

B.In an MVL, the directors must make a statutory declaration of solvency; in a CVL, the company is insolvent.✓ Correct

A Members' Voluntary Liquidation (MVL) is used when a company is solvent. The directors must swear a statutory declaration of solvency stating the company can pay its debts within 12 months. If they cannot make this declaration, the process becomes a Creditors' Voluntary Liquidation (CVL), where creditors have control.

Common mistakes

Assuming a Creditors' Voluntary Liquidation is initiated by the creditors (it is initiated by the members, but creditors take control).

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