Creditors' Voluntary Liquidation
Company Voluntary Liquidation - Find out now the best insolvency procedure for your business
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Creditors' Voluntary Liquidation
What is it and when does your company need it?
Creditors Voluntary Liquidations (CVL) are an insolvency procedure that can be started when a company is insolvent. In this case, the manager may decide to take all the necessary steps for placing the company into CVL. So, if you find yourself in this situation, you have to collaborate with a licensed Insolvency Practitioner in order to initiate the process. He will be in charge of preparing the documentation for the liquidation and, also, he will discuss with you the financial situation and the options available. Together, you will find the best way to manage the liquidation process.
Find out now the best procedure for your company
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CVL – Advantages to consider when starting the Creditors Voluntary Liquidation process
The Insolvency Practitioner knows exactly how to guide you through the entire process, so there are many advantages that you have to take into account when it comes to insolvency. An IP will gather all the necessary information and all the documents needed. Also, the Liquidator will have to deal with all the company assets, by investigating, at the same time, the company’s affairs in order to conclude all the main matters regarding the case.
Therefore, the Creditors Voluntary Liquidation (CVL) can be a complex process and that’s why you need to have all the support you need from the CVL experts. We can offer you multiple additional services (such as Company Administration, Company Voluntary Agreement or Members Voluntary Liquidation). Our team of experts in Creditors Voluntary Liquidations is based in London, but we work with professionals who need a CVL in the whole UK.
Find out now the best procedure for your company
Personal Protection
With CVL, directors typically won’t be held personally liable for business debts, safeguarding personal finances.
Debt Forgiveness
Business debts are settled through the liquidation process, meaning directors can move forward without the weight of past financial obligations.
No Creditor Hassles
The appointed liquidator handles all communication with creditors, freeing directors from challenging conversations and negotiations.
Clean Slate
Directors have the opportunity to start anew, opening the door to new ventures without old debts looming.
Legal Compliance
Directors demonstrate responsible management by proactively addressing insolvency, maintaining their professional integrity.
Creditors voluntary liquidation process
Step 1
Instructing a Licensed Insolvency Practitioner
The first step for directors who think their company might be insolvent is to approach a Licensed IP to discuss the financial situation of the company and to decide what the best course of action is going forward.
If the company’s debts exceed its assets and the company is not able to pay its debts when they are due, the best option for the company might be to enter into CVL. The directors will call a Board Meeting to consider whether a CVL is the right choice. If a majority is reached, the Board of Directors will formally instruct a licensed IP to assist with the liquidation process.
Step 2
Preparation of the Director's Report and Statement of Affairs
The IP and their team will assist the directors with gathering all necessary information to prepare the Directors’ Report to Creditors, a Statement of Affairs together with a notice of creditors’ decision procedure by way of Virtual Meeting or Deemed Consent Procedure.
A Statement of Affairs is a financial document which presents the company’s assets and debts to creditors at the date of liquidation.
The Directors’ Report to Creditors encloses statutory information about the company, its trading history, presenting all events leading up to the insolvency and the financial position of the company. This information is sent to creditors prior to the decision procedure.
Step 3
Winding up resolutions to place the company into CVL
The company’s shareholders must pass winding up resolutions in order to place the company into liquidation. This could be done by the directors calling a General Meeting of Members and they will give the shareholders a minimum of 14 days’ notice of the General Meeting, unless short notice is given.
The alternative is the shareholders passing a special winding up resolution by Written Resolutions.
In order for the resolution to place the company into liquidation, it needs to be agreed by 75% of the company’s members by way of shares.
Step 4
Creditors’ Decision Procedure
As mentioned above, the two ways to place the company into liquidation is by way of a Virtual Meeting or a Deemed Consent procedure.
Creditors will need to receive 3 business days’ notice of the decision procedure and the proposed liquidation date must be within 14 days of the winding up resolution at the General Meeting.
If a Virtual Meeting is chosen to place the company into CVL, the directors will place an advert in the London Gazette, containing all relevant information about the creditors’ meeting.
During the Virtual Meeting, all attending creditors will vote on appointment of the proposed liquidator.
In the Deemed Consent procedure, the company’s creditors will receive a notice enclosing the proposed liquidation date, together with the proposed liquidators’ information. Should no objections be received from creditors by the proposed decision date, the company will be placed into CVL.
In both cases, creditors cannot object to the company going into liquidation, they can only object to the Directors’ choice of proposed liquidator.
Step 5
Liquidator’s Duties during the Liquidation.
Once the appointment of the liquidator is confirmed, the Directors’ powers cease. Upon appointment, the Liquidator has certain statutory duties, such as providing notice of their appointment to the creditors, London Gazette, Companies House.
The Liquidator will deal with all company assets, trying to maximise realisations to creditors. The Liquidator have also the duty to investigate the company’s affairs and to submit a report to the Insolvency Service on the Directors’ Conduct within 3 months of the appointment.
Step 6
Liquidation
comes to a close
When all assets have been dealt with, the investigations into the company’s affairs are finalised and any other matters are concluded, the Liquidators will issue their final report to creditors on the liquidation.
This process ends with the dissolution of the company.
Step 1
Instructing a Licensed Insolvency Practitioner
The first step for directors who think their company might be insolvent is to approach a Licensed IP to discuss the financial situation of the company and to decide what the best course of action is going forward.
If the company’s debts exceed its assets and the company is not able to pay its debts when they are due, the best option for the company might be to enter into CVL. The directors will call a Board Meeting to consider whether a CVL is the right choice. If a majority is reached, the Board of Directors will formally instruct a licensed IP to assist with the liquidation process.
Step 2
Preparation of the Director's Report and Statement of Affairs
The IP and their team will assist the directors with gathering all necessary information to prepare the Directors’ Report to Creditors, a Statement of Affairs together with a notice of creditors’ decision procedure by way of Virtual Meeting or Deemed Consent Procedure.
A Statement of Affairs is a financial document which presents the company’s assets and debts to creditors at the date of liquidation.
The Directors’ Report to Creditors encloses statutory information about the company, its trading history, presenting all events leading up to the insolvency and the financial position of the company. This information is sent to creditors prior to the decision procedure.
It's a bit like gathering all your financial facts to give to the people your company owes money to. This step is all about transparency and setting the stage for what comes next.
Step 3
Winding up resolutions to place the company into CVL
The company’s shareholders must pass winding up resolutions in order to place the company into liquidation. This could be done by the directors calling a General Meeting of Members and they will give the shareholders a minimum of 14 days’ notice of the General Meeting, unless short notice is given.
The alternative is the shareholders passing a special winding up resolution by Written Resolutions.
In order for the resolution to place the company into liquidation, it needs to be agreed by 75% of the company’s members by way of shares.
Step 4
Creditors’ Decision Procedure
As mentioned above, the two ways to place the company into liquidation is by way of a Virtual Meeting or a Deemed Consent procedure.
Creditors will need to receive 3 business days’ notice of the decision procedure and the proposed liquidation date must be within 14 days of the winding up resolution at the General Meeting.
If a Virtual Meeting is chosen to place the company into CVL, the directors will place an advert in the London Gazette, containing all relevant information about the creditors’ meeting.
During the Virtual Meeting, all attending creditors will vote on appointment of the proposed liquidator.
In the Deemed Consent procedure, the company’s creditors will receive a notice enclosing the proposed liquidation date, together with the proposed liquidators’ information. Should no objections be received from creditors by the proposed decision date, the company will be placed into CVL.
In both cases, creditors cannot object to the company going into liquidation, they can only object to the Directors’ choice of proposed liquidator.
Step 5
Liquidator’s Duties
during the Liquidation.
Once the appointment of the liquidator is confirmed, the Directors’ powers cease. Upon appointment, the Liquidator has certain statutory duties, such as providing notice of their appointment to the creditors, London Gazette, Companies House.
The Liquidator will deal with all company assets, trying to maximise realisations to creditors.
Step 6
Liquidation
comes to a close
When all assets have been dealt with, the investigations into the company’s affairs are finalised and any other matters are concluded, the Liquidators will issue their final report to creditors on the liquidation.
Voluntary Liquidation UK
What are Voluntary Liquidations?
Voluntary Liquidations are the most common insolvency procedure in UK. It’s the easiest way to close down a company that still has outstanding debts. The Liquidator will try to sell all valuable assets of the company, distribute the funds from the sale to the creditors, and finally, dissolve the company.
How long does a CVL take?
A Creditors’ Voluntary Liquidation’s duration can vary from a few months to a couple of years. It depends on the complexity of the case (number of creditors, number of employees to deal with, complexity of investigations into the company’s affairs, assets etc). In our experience the average length of a company voluntary liquidation is around 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 £4,000.00 + VAT
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 of voluntary liquidations
Liquidation Services
Discover Our Services
You might have heard terms like liquidation, company administration, insolvency practitioner, and many more. But what do they mean and what might be the best voluntary insolvency procedure for your company?
ADMINISTRATION
An Administration is a formal insolvency procedure in which an Insolvency Practitioner is appointed to act as an Administrator with the goal of rescuing the business and obtain the best result for the Company’s creditors
CVA
When a struggling business appears to be viable with the prospect of becoming profitable again, and the directors are willing to continue, a company voluntary arrangement (CVA) may be an ideal way to protect against legal actions.
MVL
MVL – Members Voluntary Liquidation (MVL) is a process of winding up a solvent company in a cost-effective way. This process is more advantageous than striking-off the Company on Companies House and taking out the assets as dividends since it is more tax-efficient.
important things you should know
Questions and answers
There are three tests you can run to see if your company is solvent or insolvent.
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.
Balance Sheet Test – If your companies liabilities (Creditors, Loans, Debts) exceed your company assets this means your company is likely to be insolvent.
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:
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.
Board meeting – Directors of the Company meet and decide to place the company in liquidation
Members Meeting – The Shareholders also decide that the company should be placed into liquidation
Creditors meeting – the creditors meet and agree that the company should be placed in liquidation
For more details regarding company liquidation click here.
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.
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.
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.
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.
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.
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
We will provide the relevant documentation to place the Company into liquidation on an online platform for you to review and sign the documents.
Independent valuation agents will usually be instructed pre appointment to value, market and sell the Company’s assets. Should the Director wish to make an offer for the Company’s assets, it will be considered and accepted dependent on any other offers received. The Agents will try to sell the assets for the most advantageous offer. In many cases, it is the Directors who are interested in acquiring the Company’s assets.
Any correspondence in respect of the Company should be sent to the Liquidators and their team to be reviewed and dealt with. They will contact all relevant parties to inform them the Company is now in liquidation, to complete a proof of debt (if not done already) and to ask to update their records with the Company’s new details.
As a director you have certain fiduciary duties. As such, you need to make sure you follow the law and not prioritise or prefer your own interests over the Company’s creditors. Dissipating the Company’s assets in order to settle the your own debt might result in the Joint Liquidators asking for the assets to be returned to the Company or repayments to be made towards the liquidation for a fair treatment of the body of creditors.
Usually, the Company’s change of address will be done on appointment by the Liquidators and their team. Should you receive any correspondence for the Company, please forward it to the Liquidators to be reviewed and dealt with.
As a director you have certain fiduciary duties. As such, you need to make sure you follow the law and not prioritise or prefer your own interests over the Company’s creditors. Dissipating the Company’s assets in order to settle the your own debt might result in the Joint Liquidators asking for the assets to be returned to the Company or repayments to be made towards the liquidation for a fair treatment of the body of creditors.
In the pre appointment stage, we will request the Company’s directors and management for a list of all current creditors, including any potential unpaid salaries or arrears owed to employees. Please contact the Insolvency Practitioners and their team to assist you with your claim. Usually, your claim will be reviewed and submitted to the Redundancy Payments Office. For more details on redundancy, please see Factsheet: what to do when you’ve been made redundant – GOV.UK (www.gov.uk)
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As for the director’s involvement, the bulk of it will be in the first couple of months of the liquidation.