Creditors’ Voluntary Liquidation

A creditors’ voluntary liquidation or voluntary winding-up is often the least stressful, most orderly way to close down a debt-ridden company. This insolvency procedure provides a compelling alternative to compulsory liquidation when your business is experiencing financial distress without any realistic prospect of recovery.

The creditors’ voluntary liquidation process is initiated by company directors. However, it must be carried out by an insolvency practitioner. Here at Irwin Insolvency, our licensed UK insolvency practitioners have been undertaking CVLs for many years. Under our guidance, businesses repay creditors and reach a dignified end.

If you want to find out whether a creditors’ voluntary liquidation could be appropriate for your company, call us today on 0800 254 5122. We’ll take you through your options so you can make a well-informed decision. Then if you want to arrange a CVL, we can handle the whole process, including the liquidation itself.

How Creditors’ Voluntary Liquidation Works

You may choose to place your company in a creditors’ voluntary liquidation if a return to stability and profitability isn’t feasible.

One of our insolvency practitioners can take charge of the business as liquidator. As the government’s liquidation guide makes clear, this role is crucial. The liquidator stops the company trading, seeks the best prices for its assets and sells them, distributes the proceeds among creditors and settles legal disputes.

When the creditors’ voluntary liquidation process is complete, any remaining debts are written off and the business is removed from the Companies House register. In other words, the company is dissolved and you can move on.

Eligibility for Creditors’ Voluntary Liquidation

To be a suitable candidate for a creditors’ voluntary liquidation a firm needs to fulfil certain eligibility criteria:

• The business must be insolvent.
• Other types of insolvency procedures must be unsuitable or have failed.
• 75% of shareholders (by share value) must agree to the CVL.

Setting up a CVL

A creditors’ voluntary liquidation can be arranged rapidly – the process usually takes between two and four weeks.

The key steps include:

1. Company directors, in consultation with an insolvency practitioner, decide that entering a creditors’ voluntary liquidation is the best course of action.
2. The IP gathers detailed information about the company’s financial position and history in order to provide shareholders and creditors with a Statement of Affairs and Directors’ Report.
3. Shareholders vote on a winding-up resolution (as mentioned earlier, 75% need to be in favour for the CVL to go ahead) and approve the directors’ choice of IP as liquidator.
4. Creditors’ approval is sought to formalise the liquidator’s appointment. They can ask questions about the creditors’ voluntary liquidation and/or suggest another liquidator (though this is rare). The CVL is now in place.
5. The liquidator informs Companies House about the liquidation and advertises it in The Gazette.

Creditors’ Voluntary Liquidation Benefits

A CVL has significant advantages, especially when compared to compulsory liquidation:

• More control – you nominate a liquidator and choose when your company is liquidated.
• Protects your reputation – you’re seen to be taking a proactive approach to debt and looking after creditors’ interests.
• Smoother, swifter process – there’s little or no opposition, as you have the backing of fellow directors, shareholders and creditors.
• Liquidation isn’t forced on you – you’ve chosen a creditors’ voluntary liquidation instead of waiting for compulsory liquidation.

Creditors’ Voluntary Liquidation FAQs

Is a CVL suitable for all types of debt?

Yes, all of the company’s debts are included. Secured creditors are repaid first, followed by preferential creditors then unsecured creditors.

What does a creditors’ voluntary liquidation mean for directors?

When the creditors’ voluntary liquidation begins, directors give control of the company to the liquidator, who’s obliged to investigate their conduct and report to the Insolvency Service.

Voluntary liquidation shows directors take their responsibilities seriously, so they’re less likely to face wrongful/fraudulent trading accusations or be disqualified from future directorships.

How do CVLs affect employees?

Because businesses cease trading, employment contracts end. However, employees can claim redundancy payments from the government, as can directors classed as employees.

How long does a creditors’ voluntary liquidation last?

Between about six months and several years – the exact duration will depend on the company’s size, complexity of its financial affairs and number/type of assets.

We’ll be on hand throughout.

CVLs from Liquidation Experts

We understand that deciding to liquidate a company can be painful. But with a creditors’ voluntary liquidation arranged and administered by one of our experienced insolvency practitioners, you can make the process as straightforward as possible.

Check if a CVL is right for your company and start the process – contact Irwin Insolvency