Creditors’ Voluntary Liquidation

CVL

Most Common Solution

What is a Creditor's Voluntary Liquidation (CVL)

A creditor’s voluntary liquidation, also called a CVL, is the most common procedure in insolvency.

It is performed when a director of an insolvent limited company decides to close the business, liquidate the assets, pay the creditors and wrap everything up.

In this process an Insolvency Practitioner (IP) is appointed by the director and approved by the creditors. The Insolvency Practitioner, also called in this instance the Liquidator has the job of overseeing the entire process of the liquidation, realizing the assets, discussing with the creditors, the government institutions and preparing the necessary reports for them.

In this process the director of the limited company will have a minimum involvement.

Straightforward process

How does a CVL work?

Step 1 - Board Meeting of Directors

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Step 2- Notice to the Creditors and Shareholders

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Step 2- Notice to the Creditors and Shareholders

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Step 2- Notice to the Creditors and Shareholders

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How long does a CVL take?

A creditor’s voluntary liquidation can last from a few months to a few years. It all depends on the complexity of the case (how many creditors, how big is the debt, how many assets are there etc.). In our experience the average length of a liquidation is under 1 year.

As for the director’s involvement, the bulk of it will be in the first couple of months of the liquidation.

How much does a cVL Cost?

The market’s average for a standard CVL – Creditor’s Voluntary Liquidation is £5,000.00.

This is just a standard fee, and the price can differ from case to case.

Things like the number of creditors, the total debt, number of shareholders, asset level etc. can influence the price.

important things you should know

Questions And Answers about a creditors' voluntary liquidation (CVL)

There are three tests you can run to see if your company is solvent or insolvent.

  1. Cash Flow Test – A company should be able to pay it’s debt as they fall due. If this is not possible your company may be insolvent.

  2. Balance Sheet Test – If your companies liabilities (Creditors, Loans, Debts) exceed your company assets this means your company is likely to be insolvent.

  3. Legal actions against your company – A major warning sign that your company is insolvent is receiving any letters threatening with legal actions against your company, from creditors. Such legal documents may be: Winding Up Petitions an CCJ – County Court Judgement.

A company can be easily placed into liquidation. The first step is to have a discussion with a Licensed Insolvency Practitioner and determine a course of action. If Liquidation is the best route, the process can be started immediately. The steps for placing a company in liquidation are the following: 

  1. Prepare the statement of affairs (SOA) – a document presenting the clear situation of your company, the level of debt, all the creditors, the assets level of the company and the history of your company. 

  2. Board meeting – Directors of the Company meet and decide to place the company in liquidation

  3. Members Meeting – The Shareholders also decide that the company should be placed into liquidation

  4. Creditors meeting – the creditors meet and agree that the company should be placed in liquidation

For more details regarding company liquidation click here.

Directors’ duties cease at the date of liquidation, although the director’s full ongoing co-operation and assistance is required by the Liquidator. The company’s directors must:

• Give the Liquidator information about the company’s affairs
• Provide details of its assets and liabilities
• Preserve and hand over the company’s assets to the Liquidator; and
• Preserve and hand over the company’s books, records, bank statements, insurance policies and other papers relating to its assets and liabilities.

Having a limited liability company means that the directors have little risk (or limited liability) if the company fails, as long as they have acted properly and acted in time.

There are few instances where the Directors are liable such as wrongful trading.

Each insolvency case is different and the only way to know for sure is to speak directly with a Licensed Insolvency Practitioner.

Get in touch with one of our team members now.

In a creditors voluntary liquidation the cost to place the company into liquidation may be paid from assets if sufficient.

Liquidators fees post appointment can only be drawn from asset recoveries.

The benefit of a limited company provides the director with protection against company debts.

However please contact one of our insolvency practitioners if you have signed a Personal Guarantee over a debt of the company.

Yes, it is possible for a director to set up a new company although there may be some restrictions put in place by HM Revenue & Customs

The liquidator, administrative receiver, administrator or Official Receiver has a duty to send the Secretary of State for Business, Enterprise and Regulatory Reform, a report on the conduct of all directors who were in office in the last 3 years of the company’s trading. The Secretary of State has to decide whether it is in the public interest to seek a disqualification order against a director.

Examples of the most commonly reported conduct are:

  • Continuing the company’s trading when the company was insolvent;

  • Failing to keep proper accounting records;

  • Failing to prepare and file accounts or make returns to Companies House; and

  • Failing to send in returns or pay to the Crown any tax that is due.

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Is a company voluntary arrangement - CVA- the best solution?

CVA Company Voluntary Arrangement

WHAT IS A COMPANY VOLUNTARY ARRANGEMENT (CVA)?

A company voluntary arrangement, also called a CVA, is legally binding agreement with your company’s creditors to allow a proportion of it’s debt to be paid over time.

It is performed when a company is viable to go forward but is burdened by debt.

A company voluntary arrangement can only be implemented by a licensed insolvency practitioner who will draft a proposal for the creditors. A meeting of creditors is held to see if the CVA is accepted. As long as 75% (by debt value) of the creditors who vote agree then the CVA is accepted. All the company creditors are then bound to the terms of the proposal whether or not they voted. Creditors are also unable to take further legal actions as long as the terms are adhered to, and existing legal action such as a winding-up order ceases.

In this process the director of the limited company will have a minimum involvement.

HOW LONG DOES CVA LAST?

This arrangement can last from a few months to a few years. It all depends on the complexity of the case (how many creditors, how big is the debt, how many assets are there etc.).

CVA Company Voluntary Arrangement
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HOW MUCH DOES A COMPANY VOLUNTARY ARRANGEMENT (CVA) COST?

The market’s average for a standard CVA is £7,000.00.

This is just a standard fee, and the price can differ from case to case.

Things like the number of creditors, the total debt, number of shareholders, asset level etc. can influence the price.

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Please do not include confidential or sensitive information in your message. In the event that we are representing a party with opposing interests to your own, we may have a duty to disclose any information you provide to our client.

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