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Creditors’ Voluntary Liquidation (CVL)

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Liquidation (CVL) What is it?

Creditors’ Voluntary Liquidation (CVL) is a legal process in which a company that is no longer able to pay its debts as and when they fall due, or its liabilities exceed its assets, is wound up and its assets are distributed to its creditors.

The process of a CVL typically begins when the directors of the company determine that it can no longer pay its debts as they fall due as they have insufficient cash. They therefore then resolve to wind up the company. They then appoint a liquidator to take control of the company’s assets and to oversee the process of liquidation.

The liquidator’s primary responsibilities include realising the company’s assets, collecting any outstanding debts, and distributing the proceeds to the creditors in accordance with the priority order of their claims.

Creditors have to submit a claim for their outstanding debt to the liquidator, which the liquidator then examines for validity, and ultimately, if funds allow, pays them as per the correct priority order.

Liquidation – Process into CVL

If you are a company director in the UK and you are considering placing your company into liquidation, here is a list of steps you should follow that SPK can advise on:
01
Determine if your company is insolvent.
02
Consider your options for dealing with the insolvency, including administration, voluntary liquidation, and compulsory liquidation.
03
Assuming CVL is the correct option – appoint an SPK licensed insolvency practitioner to act as the liquidator.
04
Hold a meeting of the shareholders and pass a resolution to place the company into liquidation.
05
File the necessary documents with Companies House.
06
Notify creditors of the decision to liquidate.
07
Cooperate with the liquidator and provide any requested information or documents.

By following these steps, you, with the guidance of SPK, can ensure that you are adhering to your duties as a director and the liquidation process is carried out smoothly and efficiently.

If you have any questions concerning the process, please don’t hesitate to call us.

Advantages of a CVL for a Director and the Company

There are several advantages of a CVL for the directors and shareholders of the company:

1. Control: The directors of the company retain control of the liquidation process, rather than having a courtappointed

liquidator take over.

2. Speed: A CVL can be completed more quickly than a compulsory liquidation, which is initiated by a court.

3. Creditor approval: In a CVL, the creditors of the company vote on the appointment of the liquidator and on the

terms of the liquidation, which can provide a degree of certainty for the company’s stakeholders.

4. Limited liability: Once a CVL has been completed, the directors and shareholders are generally released from

any further liability for the company’s debts.

5. Cost-effective: In general, a CVL can be less expensive than other types of liquidation, as the liquidator’s fees

are paid from the assets of the company.

6. Better Returns: Shareholders may get a better return on their investment as the company’s assets are distributed among creditors, rather than going to the government in case of compulsory liquidation.