A Roundtable Discussion with Insolvency Practitioners (‘IPs’) working in the Members’ Voluntary Liquidation (‘MVL’) market was held earlier in the summer. The purpose of the roundtable was to understand the current state of the MVL market and to explore whether there were any areas of concern or increased risk which R3 members should be made aware of. Understandably, given the timing of the roundtable, there was a significant amount of discussion arising from the High Court decision in NOAL SCSp & Ors v Novalpina Capital LLP & Ors and the potentially significant implications for the insolvency profession.
It was evident from member communications, social media, the roundtable, and from the detailed survey responses we have since compiled from members in attendance, that there is concern across the profession regarding the Judge’s strict interpretation of the 12-month rule for paying all creditors in an MVL under section 95 of the Insolvency Act 1986.
The Decision
In the case the High Court held that the 12-month rule in MVLs is a strict requirement, not a flexible guideline and if a company in MVL cannot pay all its debts (including interest) in full within 12-months of winding up, the liquidation must be converted to a Creditors’ Voluntary Liquidation even if the company has sufficient funds to pay all of its debts in due course.
Practical issues and Unintended Consequences
This judgment creates significant practical challenges for Insolvency Practitioners managing MVL cases and advising directors on solvent winding-up with the following concerns being raised by the roundtable attendees.
- Immediate uncertainty for existing MVL cases with contingent claims that have been open for longer than 12 months.
- Practical difficulties in managing delays caused by HMRC administrative processes where no outstanding debt to HMRC is anticipated.
- Diminished ability of liquidators’ to manage cases commercially, achieve optimal settlements and mitigate risk for all stakeholders.
- Potential conflict between the Judge’s strict 12-month rule and the practicalities of the provable claim rules.
- Increased use of alternative procedures such as voluntary strike off as directors seek to avoid the uncertainty arising from the judgment.
Letter to The Insolvency Service
We understand that the Service may need to await the outcome of any appeal before providing formal guidance or considering legislative change. However, given the significant impact on the profession and the uncertainty it has created, we have written to the Service asking if they could:
- Engage with R3 to discuss the key issues and unintended consequences highlighted in the letter.
- Work collaboratively with R3 to develop potential solutions, including considering legislative amendments, should the judgment be upheld on appeal. Our members have already begun to identify potential procedural changes for debate, such as providing that conversion is not required where claims remain to be adjudicated at the 12-month stage, but the liquidator is satisfied they can be paid.
- Consider our member’s comments that the most immediate concern is what MVL liquidators should do if they are appointed over an MVL that is over 12 months and take the view that they should take their own advice.
Joint RPB statement
Following the letter being sent to the Service, the RPB’s issued a joint statement on the decision. The Joint Statement can be found below.
Reply from The Insolvency Service (11 September 2025)
Thank you for your letter, with appendix, of 27 August.
We were aware of the Novalpina judgment and the concern it has caused among the profession. Our Policy Team reviewed the judgment when it was handed down and was represented at the R3 MVL Roundtable in July, where the judgment was one of the subjects discussed. We would be happy to attend any future events of this nature.
I am aware of media reports that the judgment is to be appealed. Assuming this is so, it would not be right for me to comment on the detail of the case, nor of the legislative provisions considered, prior to its consideration by the Court of Appeal. However, I am watching with interest to see whether nor not an appeal goes forward, and if so, what the outcome might be.
Pending any appeal, if practitioners are concerned about what they should do on individual MVL cases over which they are appointed, they should follow the guidance recently issued on Novalpina by the RPBs. If any are in doubt as to what they should do on a particular case, they should seek legal advice.
Concerns over HMRC processes and their potential impact on MVLs should be taken up with HMRC. I note that HMRC updated its guidance on MVLs in August and I hope that this has proven helpful to practitioners.
Unlike other Insolvency Act 1986 procedures, little research exists on MVLs. Without an accurate idea of what the whole population of MVL cases looks like in England and Wales, it is difficult to know the impact of the judgment (or of any legislative changes that might be suggested), beyond anecdotal evidence from individual IPs or firms.
While such evidence is extremely useful in indicating that a problem may exist, it has more limited value in judging wider impacts that may be caused across the whole MVL landscape in England and Wales. Subject to available resources, we are considering commissioning independent research into MVLs, much as we did for CVLs last year. This will provide a more robust evidence base when considering the impact of the judgment. As with the CVL research, if we do commission research on MVLs, it will be published on gov.uk in due course.