Restructuring and Insolvency

Creditors Voluntary Liquidation (CVL)

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What is Creditors Voluntary Liquidation?

Creditors Voluntary Liquidation (CVL) is the most common liquidation process for companies which are experiencing financial difficulty from which they cannot recover. If a company cannot pay its creditors (debts), doesn’t have enough funds to continue to operate and is not able to benefit from a Turnaround & Rescue or administration procedure, the company can be placed into liquidation.

Once it is clear that there is no reasonable prospect of a company avoiding insolvent liquidation, company directors must take steps to ensure that the company is not trading whilst insolvent. In the event that a company continues to trade whilst insolvent, this is known as Wrongful Trading, which can result in personal liability for the directors.

The creditors voluntary liquidation (CVL) process

  1. Initial advice meeting with an ICS licensed insolvency practitioner
  2. A board meeting is held where directors come to the conclusion that the company cannot continue trading and that the company should therefore be placed into CVL
  3. A Statement of Affairs is produced (this is a document which states the company’s assets and liabilities) and is signed off by the company’s directors
  4. The Statement of Affairs is supported by a narrative report which includes the company’s background and events leading to liquidation – these documents are circulated to shareholders and creditors
  5. A Shareholders’ meeting is convened to consider the resolution to place the company into liquidation, the resolution must be passed by 75% of shareholders voting in favour
  6. It is the responsibility of a company’s creditors to confirm the appointment of a liquidator, this is carried out via a statutory decision procedure, either a virtual creditors meeting or using the deemed consent procedure (creditors representing certain threshold criteria can request a physical creditors meeting)
  7. Once in liquidation, it is the liquidator’s responsibility to realise and distribute the company’s assets.

In practice, following the initial advice meeting, ICS will put together all the relevant paperwork and documentation to place the company into liquidation. This includes producing the board meeting minutes and notices, preparing the Statement of Affairs and supporting report, liaising with shareholders and creditors and dealing with the formalities of the shareholders meeting and creditor decision procedure (and creditors meeting if applicable).

How do I find out more about liquidation?

We understand that contemplating the liquidation of your business is a stressful and likely upsetting prospect. It is important that you understand exactly what the process is and how it is going to be handled. As like anything in business, one of the most important things is to be in control.

Creditors voluntary liquidations, or CVLs, is our most common procedure and we have advised companies of all shapes and sizes, covering a wide range of industry sectors – we would be surprised if there isn’t a sector we haven’t advised over the years. If you think a CVL may be the best course of action for your company, then the first thing you need to do is seek professional advice.

Our expert team can help you understand more about the liquidation process and can guide you every step of the way. Visit our contact us page and fill in the form to get in touch or give our team a call on 0800 731 2466.

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