Creditors Voluntary Liquidation
Creditors Voluntary Liquidation (CVL) is a formal insolvency process used by Directors, to close down a limited company that can not repay its debts. The CVL process commences with the Directors instructing a Licensed Insolvency Practitioner to act as Liquidator. Once appointed, the role of the Liquidator is to realise the value of the company’s assets in order to repay as much of the debt as possible. Once all the company’s assets have been dealt with, the Liquidator will close the company.
In the UK, over 1,000 limited companies enter Voluntary Liquidation every month. Creditors voluntary liquidation (CVL) is by far the most popular form of liquidation. This page deals with CVL’s however there are other types of liquidation available.
What some directors don’t realise is that liquidating a loss making company isn’t just a way of cutting your losses and closing down the business. It can also provide an opportunity to relaunch the business debt free, with the assets, employees and goodwill transferred and sold to a new phoenix company, which is debt free.
Of course you may wish simply to walk away from what you believe is an unrecoverable situation, but you may also want to get that second chance having learnt some very valuable business lessons. Either way it is important you take proper advise and have all options, including business turnaround strategies explained. Remember it is important to understand the pro’s and cons, and have the upsides and downsides explained before making a final decision.
What is a Creditors Voluntary Liquidation ?
Liquidation is a legal method by which a company is closed down and its assets are sold to pay off its debts. A creditors’ voluntary liquidation is one form of this. When people talk about liquidation, they usually mean a CVL.
Once the directors and the shareholders of a company have decided to pursue a CVL, an insolvency practitioner will be engaged and a meeting of the company’s creditors is called. At the meeting, the creditors get the chance to approve the decision – hence the term ‘creditors’ voluntary liquidation’.
The insolvency practitioner or IP will oversee the process and ensure all the rules and regulations are adhered to. They effectively take over the role of the directors to finalise the affairs of the company.
Once all the assets have been sold off and the process has been completed, the company is dissolved and removed from the Companies House Register.
Advantages of Liquidation
- Stops Bailiffs and Legal Action against the Company; including HMRC / TAX / VAT Enforcement
- Process can be completed by Phone and Email – usually no need to attend any Meetings with Creditors
- The cost of the Liquidation is usually covered by the value of company asset
- No ongoing monthly payment plans
- Simple process that does not require your Creditors to agree to it
- The process can be completed in less than 10-days!
- Employees can often claim unpaid wages, holiday pay and redundancy from the Insolvency Service*
- Directors may also be able to claim back ‘thousands’ in unpaid wages and redundancy*