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A Creditors Voluntary Liquidation (CVL) allows you to close your insolvent company where cash flow problems and creditor pressure mean it can't continue.

Thinking of a CVL?

Here are some of the advantages:

  • Quickly removes creditor pressure.
  • Stops further legal action.
  • Can provide the lifeline a ‘business’ needs to continue trading under a different legal entity.
  • Allows your employees to claim their unpaid wages and redundancy pay from the government.

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How to apply for a Creditors Voluntary Liquidation (CVL)

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If your limited company is insolvent and the debts are so severe that trading on isn’t a feasible solution, you can apply for a Creditors Voluntary Liquidation (CVL) to close your company in an orderly manner. The process can lead to a higher return for your creditors and shareholders than if you were to undergo compulsory liquidation.

What is a Creditors Voluntary Liquidation?

A Creditors Voluntary Liquidation (CVL) is a formal insolvency process. CVLs close insolvent companies where debt and creditor pressure make it impossible for the business to continue in its current form.

The main difference between a CVL and compulsory liquidation is a CVL is applied for voluntarily by the directors and shareholders. Compulsory liquidation is petitioned for by the creditors after attempts to recover the insolvent company’s debts have failed.

More information on Creditors Voluntary Liquidation

Applying for a CVL

As it’s illegal to strike off a company with outstanding debts, if you wish to close your insolvent company, a CVL is likely the best way forward. You have more control over the business’ closure than if you waited for compulsory liquidation following a winding-up petition.

How to apply for a Creditors Voluntary Liquidation

  1. Initial advice

    Before you decide closure is the best option for your insolvent business, you should seek professional advice from our licensed insolvency practitioners (IP).
    Speak to our initial advice team, who can assess your business’ circumstances and help decide the next step.
    During your consultation period, you may be asked to provide details of your company’s financial history and forecasts, as well as details of any liabilities or assets. All this will help our advisors and consultants decide the best solution for your company.
    If liquidation isn’t necessary, you could explore administration, or a Company Voluntary Arrangement (CVA). If liquidation is the best way forward, you can formally engage us, and preparation can begin.

  2. Preparation for liquidation

    Before the liquidation, you should conduct a meeting with the company’s shareholders. 75% of the shareholders must vote to pass the ‘winding-up resolution’ before the liquidation is proposed to the creditors.

  3. Contacting the creditors

    Before the formal engagement, the IP will become the proposed liquidator. You’ll be asked to provide any information which the liquidator requests, and a list of the company’s creditors. After which, we will be the creditors’ point of contact and will deal with them on your behalf. We will also contact the creditors to arrange a creditors meeting. These meetings are often held virtually, although creditors can request a physical meeting – which must be requested by at least 10% by value of creditors.

  4. The appointment of liquidator

    Once the proposal is accepted, our IP will be appointed as liquidator. Trading ceases, company assets are realised, any distributions are made, employees are made redundant, and investigations into the directors’ conduct will be carried out in due course.

From this point, directors no longer have control over the company or its assets. Nor can they act on the company’s behalf.

In summary

If your company is insolvent, with such a level of debt that it can’t continue trading, you can apply for a Creditors Voluntary Liquidation (CVL) to alleviate the problem. Once you speak to our initial advice team, we will assess your company’s circumstances and decide whether liquidation is the best route forward. We will speak to your creditors, and once the liquidation is approved, we will work to close the company in an orderly manner.

How we can help

If your company’s debts are of such a level that your company could close, you should seek help immediately and apply for a Creditors Voluntary Liquidation. Doing so is preferable to your creditors winding it up through a compulsory one. Speak to one of our initial advisors today, and we can provide you with free, impartial advice with no obligation.

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Authored by Gemma Roberts

Gemma Roberts

Licensed Insolvency Practitioner & Senior Insolvency Manager

Beverley Horton Christopher Callaghan Stephen Hall

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