A recent High Court ruling has reaffirmed that the so-called ‘12-month rule’ in a Members’ Voluntary Liquidation (MVL) is a statutory requirement—not merely insolvency guidance.
Following the decision in NOAL SCSP & Ors v Novalpina Capital LLP & Ors [2025] EWHC1392 (Ch), the Court clarified that the obligations under Section 89(1) of the Insolvency Act 1986 must be strictly adhered to. Directors must declare that the company will be able to pay all debts in full, including statutory interest and liquidation expenses, within12 months from the start of the winding-up process. This goes beyond simply maintaining a solvent balance sheet, but requires full settlement of all liabilities within the timeframe.
If any liabilities remain unpaid at the end of the 12-month period, the insolvency practitioner is legally obliged to convert the MVL into a Creditors’ Voluntary Liquidation(CVL).
What Does This Mean for You and Your Clients?
If there is any doubt that all debts and costs can be fully paid within 12 months, directors should strongly consider entering a CVL instead. It’s important not to rely on anticipated income, refunds, or receivables that are uncertain or may realise after the12-month deadline.
This recent ruling reinforces the importance of seeking early advice before entering a Members’ Voluntary Liquidation. Acting early can help you avoid unnecessary risks, ensure the process runs smoothly, and confirm whether an MVL is appropriate. If you or your clients are considering an MVL and have any questions or concerns, please don’t hesitate to get in touch!