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What is Creditors Voluntary Liquidation?

A Creditors Voluntary Liquidation (CVL) is a formal insolvency process initiated by directors when a company is unable to meet its financial obligations (insolvent) and cannot continue trading.

Unlike Compulsory Liquidation, CVLs are voluntary decisions taken by the directors in the best interests of the company and its stakeholders.

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Board Meeting Of Directors

Once the advice from a licensed Insolvency Practitioner (IP) has been to undertake a CVL, a meeting of the board of directors is held, resolving to convene a meeting of shareholders and creditors to place the company into liquidation.

Following this meeting, an IP is formally instructed.

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Notice to Shareholders and Creditors

Shareholders and creditors will be notified of their meeting date/time and presented with a Statement Of Affairs for the company. A report is also prepared giving an overview of the company’s trading history and its recent accounts amongst other things.

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Creditors / Shareholder Meeting

A creditors meeting will take place, usually following a shareholder meeting. Creditors ask the director questions about the demise of the business and then vote on the resolutions and whether to retain the appointed IP or choose their own.

If approved by the majority (by the value of debt) the company is placed into Liquidation.

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The Liquidation

All assets are independently valued, marketed and sold to enable a dividend to be paid to creditors. The IPs will deal with all creditor claims, employee claims, collecting book debt and issuing reports to government agencies.

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Distribution To Creditors

Once all monies have been realised, (this could include chasing directors for personal assets/money) a distribution will be made to creditors in their priority order. Fixed charge holders, preferential creditors, HMRC, secured creditors with a floating charge, and finally unsecured creditors.

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Company Dissolved

Once the insolvency process has finished, the company is officially dissolved at Companies House and will no longer exist. Any remaining debts are written off unless a director has provided a personal guarantee in which case they will need to deal with them personally.

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Control

Directors can choose the Insolvency Practitioner they would like to work with and choose when to engage them.

Speed

A CVL is faster than a court-ordered liquidation and saves the company from incurring further unnecessary costs. Early action can often maximise asset realisation and creditor return.

Relief

Once the Insolvency Practitioner has been engaged the director ceases to be an officer of the company. Therefore they no longer need to deal with creditors and the affairs of the business. A big relief for some after periods of sustained pressure.

Yes – HMRC can absolutely chase a dissolved company. They have six years from the date of dissolution and twenty years if they believe and fraud or negligence has taken place.

Yes, you can. However, should your conduct as a director be called into question for the company you were a director of, you could be banned at a later stage.

No it will not. Being the director of a limited company limits the liability to the company. That is providing you have acted as any reasonable person would whilst running the business and not signed up to any personal guarantees or have an overdrawn directors loan account.

Please contact us at your earliest convenience. We can provide guidance on the Company’s ability to repay these amounts over time and assist in negotiating a suitable time-to-pay arrangement with HMRC on your behalf. Acting promptly increases the likelihood of HMRC providing assistance.

Fees vary depending on the level of work that needs to be undertaken and the level of specialism that needs to be given.

Disqualification under the Company Directors Disqualification Act bars former directors from holding director positions in UK-linked limited liability or overseas companies. They are also prohibited from involvement in setting up or managing such entities.

What is Creditors Voluntary Liquidation?

Understanding The Process

Advantages of a Creditors Voluntary Liquidation

Frequently Asked Questions