Creditors’ Voluntary Liquidation


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 - Instructing a Licensed Insolvency Practitioner

The first step for any director who thinks that his company might be insolvent is to discuss with a Licenced Insolvency Practitioner who can assess the financial situation of the company and decide what is the best course of action going forward. Depending on the level of assets and debts the company has, a Liquidator may present various rescue options such as company administration or creditors voluntary arrangement.However, if a rescue option is not viable for your business and the directors and shareholders prefer closing down the company for good, a liquidation might be the best option going forward. If this is the case, the directors can instruct the liquidator to start the procedure of placing the company into creditors’ voluntary liquidation.

Step 2 - Preparation of the Director's Report and Statement of Affairs

The statement of affairs is a document prepared by the directors with the assistance of the insolvency practitioner. This document presents the details of the company's financial position including the breakdown of the the total assets of the company and also so the total liabilities. All the realiseable assets and all the creditors (and the amounts owed to them) have to be disclosed in this document. Directors also have to prepare a document called the directors report detailing the history of the company the financial results and the main reasons why the company became insolvent. This information is sent to the creditors prior to the decision procedure.

Step 3 - Meeting of the Board of Directors

The companies act 2006 provides the necessary mechanisms required to wind up a company using a General Meeting of its shareholders. This process starts with an official meeting of the board of directors in which the Insolency Practitoner is appointed as Proposed Liquidator. Dates for the shareholders meeting and creditors’ meeting are also set. They are both held on the same date, usually 14 days after the board meeting, time in which the creditors, and other interested parties can be notified of the insolvency process. In this timeframe the Proposed Liquidators have the authority to instruct valuation agents, discuss with creditors and the banks, and to request information from the company’s accountants. It is important to understand that even if the names of these procedures indicate that meetings are being held, in reality the process is done virtually via the internet, and no physical meeting is actually held.

Step 4 - Shareholders' Meeting

A special resolution is required to be passed in order for the liquidation process to take place. In order for the resolution to pass 75% of the shareholders (by value of shares) have to vote for it. A commonly used alternative to the shareholders' meeting is the decision procedure by written resolution. For this procedure, voting forms are sent electronically to all shareholders and returned in the same manner.

Step 4 - Creditors' Meeting

The creditors' decision procedure is held on the same day as the shareholders' meeting. At this meeting the Proposed Liquidator is confirmed by the creditors.It is important to note that the creditors cannot oppose the liquidation process, however they can nominate another liquidator.

Step 5 - Liquidator is appointed and the Company is officially in Liquidation

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Step 6 - The Liquidator carries out his duties

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Step 7 - Liquidation comes to a close

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

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.

Get in touch with us Today for a free consultation!

Feel free to either reach us directly via phone or email or submit a consultation form, detailing your situation and one of our team members will get back to you as promptly as possible.

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.

Privacy Policy


It helps us filter spam content.

Insolvency Help Experts Contact Info


Monday – Friday
9AM – 6PM


City Road
London, EC1V 2NX