Creditors Voluntary Liquidation
What is a creditors voluntary liquidation (CVL)?
A Creditors’ voluntary liquidation or CVL is a voluntary process that is available for directors of a company to instigate an orderly winding up of the company. This process is normally utilised when a company is balance sheet insolvent and/or is unable to pay its liabilities as they fall due and the only option is to cease trade.
The liquidation or ‘winding up’ process allows you to use company’s assets to pay off its debts – with any money left over being paid to its shareholders.
When should a director seek insolvency advice?Directors should seek advice as to whether it is necessary to place a company into Creditors’ voluntary liquidation as soon as they become aware that the company may be insolvent. If your business is unable to pay its debts, it is important to act fast to prevent putting directors at risk of facing action for wrongful trading or fraudulent preference. In some cases, particularly if you take no action, you may be forced into compulsory liquidation.
What happens during a CVL:
- The business stops trading
- The employees are all made redundant
- All assets, and possibly the business, are sold to pay creditors
The advantages of a CVL:
- Quickly removes creditor pressure
- Stops further legal action
- Continue trading
- Allows your employees to claim unpaid wages and redundancy pay from the government
- Protects any personal liability of the directors
How a CVL works
- Directors hold a board meeting resolving to place the company into liquidation and call a meeting of shareholders.
- Shareholders pass a Special Resolution to close the company via a Creditors Voluntary Liquidation.
- Shareholders vote on the resolution and appoint a liquidator. A 75% majority is needed in favour to pass the resolution. Those that don’t vote don’t count.
- Creditors are given notice of a separate meeting, to approve the liquidator, or choose their own. This usually follows straight after the shareholders meeting on the same day.
- The Insolvency Practitioner will then realise assets, agree the creditors’ claims and carry out all necessary procedures required by the Insolvency Act and Rules and report to creditors and shareholders by way of progress reports.
How long does a CVL take?
- From the day the directors agree to liquidate, it takes 14 days to put a company into Creditors’ Voluntary Liquidation. If 90% or more of all shareholders agree to short notice, then the liquidation can happen within seven days (this is the minimum statutory notice period to creditors).
Let us take the stress out of the liquidation process
Where a rescue is not possible, turpin barker armstrong can assist directors with the formal liquidation process. This involves convening meetings of the company's members where resolutions are proposed to wind the company up and appoint a liquidator. A meeting of the company's creditors will also be convened in order to confirm the appointment of a liquidator.
The duly appointed liquidator will then seek to realise any remaining assets of the company for the benefit of creditors. The process of placing a company into Creditors' Voluntary Liquidation is relatively straight forward and can be done in a very short space of time.
We at turpin barker armstrong have many years of experience working with directors to place their company into a Creditors' Voluntary Liquidation. Our licensed Insolvency Practitioners can assist directors throughout the whole process and are always at the end of the phone to answer any queries to make the process run as smoothly as possible.
We understand it is a stressful time and therefore offer the first meeting FREE of charge with no obligations to go ahead, we can discuss the whole process with the director to ensure it is the right decision for the company. We always suggest to seek advice as soon as the first signs of financially difficulty appear.
Early Insolvency advice is best!
In this video our senior Partner Martin Armstrong talks about what determines insolvency in relation to a company and how it is important for directors to seek advice as soon as possible.
(IMD Solicitors seminar on "Planning for the future through a Shareholders Agreement")
Need more help regarding CVL's or anything insolvency related schedule a FREE telephone call with us at a date and time suitable for you