A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
What is a Declaration of Solvency?
The Declaration of Solvency is the sworn statement that makes a Members' Voluntary Liquidation possible: a formal declaration by the directors that the company can pay all of its debts, with statutory interest, within 12 months.
What you're actually declaring
The declaration includes a statement of the company's assets and liabilities and is sworn within the five weeks before the winding-up resolution - and it must cover everything: trade creditors, final tax bills, contingent and disputed liabilities, and the costs of the process itself.
The commonest oversights are the quiet liabilities - a final corporation tax charge, VAT on asset disposals, warranty and lease tails - which is why the declaration is prepared with the practitioner rather than signed on optimism.
Why it's taken seriously
Swearing a declaration without reasonable grounds is a criminal offence - and if the company proves unable to pay its debts in the 12 months, directors face a rebuttable presumption they lacked those grounds.
Practically, a failed declaration converts the MVL into a Creditors' Voluntary Liquidation, with the delay, cost, and scrutiny that entails.
Getting it right
Reconcile every liability before swearing; where genuine doubt exists about solvency, resolve it first - or accept the company's route is a CVL, not an MVL - and let the practitioner's checklist, not the calendar, set the signing date.
Call our licensed insolvency practitioners in Manchester on 0333 023 5090 - free, confidential, and directly with an ICAEW-licensed IP.
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This page is intended for general information purposes only and does not constitute financial, legal, or professional advice. Always take advice from a licensed insolvency practitioner about your specific position.