CVL – Creditors Voluntary Liquidation

If you feel that your company has no viable future because of mounting creditor pressure, a Creditors’ Voluntary Liquidation could be the best option to conclude its affairs.  Liquidation is always viewed as the end of the road, but it could be possible to continue the business, making a fresh start under a new company with the sale and purchase of assets whilst leaving the debt of the old company behind for a liquidator to deal with.

CVL Overview

Creditors Voluntary Liquidation is certainly the most commonly used company insolvency process in the UK.  This procedure can give directors and shareholders the opportunity to purchase the business assets and goodwill and then re-open the business within another company, subject to certain conditions.  A Creditors Voluntary Liquidation is always a director-led process and can only be initiated by the board of directors.

What is a Creditors’ Voluntary Liquidation?

A Creditors Voluntary Liquidation, also known as CVL, is the procedure whereby a Company that finds itself in an insolvent position is placed into liquidation with the help of an Insolvency Practitioner.

CVL Process

The process begins, initially, when taking professional advice from a Licensed Insolvency Practitioner.  A Licensed Insolvency Practitioner will provide the board of directors with appropriate advice. If the Company is insolvent, a meeting of directors is convened whereby the process to place the Company into Creditors Voluntary Liquidation begins.

  • At this first meeting of directors, resolutions will be passed for the shareholders and creditors to consider “decision procedures”. A shareholder’s meeting will be convened to consider and pass the resolutions to place the company into liquidation and to appoint a liquidator and fix the liquidator’s remuneration. These resolutions will then be considered by the creditors either by way of a virtual meeting or by correspondence.
  • A virtual meeting is one where either the creditors are invited to attend through some IT platform i.e. Skype or by conference call.
  • The shareholders must receive a minimum of 14 days’ notice of the shareholder’s meeting, effectively 16 days allowing for one day posting either way, unless 95% of the shareholders agree to short notice, in which case the meeting can be held in 7 days.
  • The creditors are then entitled to receive a minimum of 3 days clear notice of the virtual meeting. Creditors can request a physical meeting but only if either 10% in value want a meeting, or if 10 creditors request a meeting or if 10% in number request a meeting.

A Liquidator can also be appointed by a “deemed consent” procedure. This is where no creditors’ meeting is held but creditors are notified via correspondence that a decision is going to be passed by deemed consent that the liquidators appointed at the shareholders’ meeting are going to remain as liquidators of the company. Creditors can object to this and, therefore, a physical meeting would need to be held if the following objections are received from:-

  • 10% of creditors in value
  • 10% of creditors in number
  • 10 creditors

How Much Does CVL Cost?

You can use our simple calculator to find out how much it could cost to liquidate your business.

CVL Calculator

Use our instant CVL Calculator to work out how much it will cost to liquidate your company.

The Role of the Insolvency Practitioner

An Insolvency Practitioner will provide appropriate advice and will always seek, in the first instance, the possibility of rescuing the company if at all possible.  For some companies, a rescue is just not possible and the use of a formal insolvency procedure is used.  There are formal insolvency procedures aimed primarily at rescuing the business, namely either a Company Voluntary Arrangement or Administration, which are discussed elsewhere on our website, but when these are not appropriate, a Creditors Voluntary Liquidation is often used as a way of concluding a company’s affairs.  The assets of the old company are sold by the liquidator appointed through the use of an independent agent, and subject to professional valuation.  The assets could be sold to any new company that the directors or shareholders have an interest in.  A liquidator does, however, have a statutory requirement to maximise the asset realisations in any liquidation estate for the benefit of the company’s creditors and, therefore, the directors and shareholders of the company entering liquidation will not get first refusal or be able to buy the assets for less than market value.

If the directors are successful in buying back a company’s assets, there are a number of legal issues and requirements that must be dealt with properly in order to ensure that the new company and its directors are fully compliant with the requirements of the law.  We are able to help you through this process and we work very closely with a number of solicitors to provide you with the advice that you need.  The appointed liquidators will deal with the affairs of the old company and will, if funds are available, make distributions to creditors.

Insolvency Warning Signs

Insolvency rarely happens in an instant. Warning signs usually develop over a period of time, but the important thing to remember is that the sooner advice is sought after any issues begin to arise, the more chance the company has of being rescued.

Some of these warning signs can include:

  • Creditors are continually chasing outstanding monies outside of their terms
  • The loss of customers, particularly those that account for a significant proportion of turnover
  • The industry in which the company operates is suffering generally
  • The Company is unable to obtain access to funds or credit to meet ongoing trading requirement
  • Bad debts

In order to foresee these causes early on, company directors need to ensure that their books and records are kept as up to date as possible, allowing them time to plan and react accordingly to unplanned events.

If a company’s directors do not take timely action to address mounting creditor pressure, then it is likely that an insolvency process will eventually ensue.  HM Revenue & Customs, or any other unsecured creditor can petition the Court to have the company put into Compulsory Liquidation if the directors fail to control the company’s affairs.  If that happens, the directors options are immediately reduced and advice from a Licensed Insolvency Practitioner is needed.

If you feel that the issues that are effecting your company are starting to impact upon its business and its viability to continue trading, then contact Corporate Financial Solutions and we can provide you with the professional advice that you need and advise you on what the next best step will be for your company’s circumstances.

UK Wide Support for Businesses from our Offices in London & Nottingham

For a Creditors’ Voluntary Liquidation, Corporate Financial Solutions will provide the directors and shareholders with appropriate advice, always seeking in the first instance a rescue of the business, but in the event that a formal procedure is required, we will ensure that all relevant paperwork and meetings are completed efficiently and as soon as possible to move the liquidation process on.

Our liquidation costs are acknowledged as being amongst the lowest in the profession and we will ensure that we assign two liquidators and a case manager to each case so there is always someone available to answer your questions who is fully aware of where matters stand. From our offices in London and the Midlands we are well placed to support businesses throughout the UK.