Accidental CVLs – what to do if your MVL appointment is faulty

Every now and again, a brave lawyer is prepared to try something innovative and having heard of one such instance last month, we thought that Martin Cork, of Freeth Cartwright, Stoke On Trent, deserved a virtual pat on the back.

We were approached by a client who had issued the usual pack of documentation for the shareholder/director to sign in an MVL. The members’ meeting was held and the liquidator was appointed, but due to a mix-up, the declaration of solvency was not sworn until a few days after the winding up resolution was passed. Now, the only difference between a CVL and an MVL is that in an MVL the directors have to have “made” a declaration of solvency before the company enters liquidation. As a result of a timing error, the liquidator was facing the possibility of having to deal with the appointment as a CVL. That would not have been a complete disaster, but it would have made it a bit more complicated for him and left him with some additional unnecessary requirements and costs (e.g. the need to do a CDDA return and the need to get fees approved by the court, as there were no creditors).

We suggested to the client that if he could find a brave lawyer, they might be prepared to help him ask the court for an order that in the circumstances the declaration of solvency was “made” (the language used in the legislation) on the date of the meeting, even if it was not sworn until later and, in the alternative, that the court agree to use its general power to move the time requirement under section 89 to allow the later swearing to be in time and the appointment to qualify as an MVL. The client approached Martin Cork and he successfully obtained an order allowing the late declaration of solvency to count under section 89. He was even clever enough to obtain an order extending the time to file the declaration of solvency at Companies House so that it could be filed “in time” after the hearing.

We have seen this sort of underlying error in a few MVLs over the years and it is refreshing to see a lawyer take such a bold approach.