A Creditors’ Voluntary Liquidation (CVL) is a method of closing a company that has become insolvent, closing the doors on the business and realising appropriate assets.
The cost of a liquidation can vary depending on the nature and complexity of the business. Here we discuss the process in more detail, as well as factors that affect its potential cost.
What is Creditors Voluntary Liquidation?
A Creditors’ Voluntary Liquidation (CVL) is a formal process available to directors of companies that have become insolvent. CVL sees the voluntary liquidation (winding up) of a company, and the sale of its assets to cover outstanding debt. Any remaining unsecured debt is written off at the end of the liquidation, with employees being able to claim redundancy directly from the government’s Redundancy Payments Office.
The process is overseen by a licensed insolvency practitioner (IP), such as ourselves, as liquidator. The appointed liquidator is responsible for acting in the best interest of the company’s creditors to secure maximum possible return.
How much does a CVL cost?
The fees for a liquidation (CVL) can vary depending on the circumstances surrounding the business, the level of its debt/number of shareholders, and the quantity/value of its assets.
It is important when obtaining advice to recognise the difference between licenced and unlicensed insolvency advisors. Some insolvency ‘advisors’ may offer their services to help your company, but have no power to carry out the liquidation process. Instead, they charge a fee after some initial advice, before acting as introducer to an insolvency practitioner. This process is not only unnecessary, as we offer both initial advice and oversight of the CVL process, but also adds extra cost to the procedure.
Ensuring that the professionals advising you on CVL are licensed and regulated IPs, like ourselves, is highly beneficial to the cost and security of the process. For a free quote, get in touch today.
How is a CVL paid for?
The fees incurred throughout the CVL process can be covered in a number of ways. These include:
The sale of company assets
If the sale value of your company’s assets is sufficient, the funds acquired may cover the IPs costs for carrying out the liquidation. This means that all costs are covered by the end of the liquidation process, with no further balance left outstanding.
Directors may choose to fund the costs of a CVL via their personal finances. This may include the sale of personal assets, use of savings, or raising finance through a personal loan.
Personal funding only usually applies to fix costs incurred in the IP’s pre-appointment stage. These can be paid directly to the Insolvency Practice. This would usually only take place when there are no other viable ways to pay for the liquidation – such as sale of assets from the company.
Director redundancy pay
Directors may also choose to fund the costs of a CVL through their own redundancy pay. In order to do this, they must have been an employee of the company for at least two years, working at least 16 hours a week. Directors must receive a monthly wage from their company in order to be entitled to redundancy pay upon liquidation.
If your company is insolvent, and you would like to discuss CVL and its costs in more detail, call us for free advice. We can assess your level of potential redundancy before committing to the cost of a CVL.
Why would I want to use a CVL?
A CVL results in the closure of a company and the discharge of debt. This is a This is a formal and regulated process. Because unsecured business debt is tied solely to the company itself, there is very little risk to directors’ personal finances when carrying out voluntary liquidation. Some benefits of CVL include:
- The sale of company assets goes towards paying off any outstanding debt, with the remainder ‘dying’ alongside the company.
- Directors’ personal finances are not at risk (as long as they are not found to have committed fraudulent trading, or signed a personal guarantee on company debt).
- The process is overseen by a licensed and regulated insolvency practitioner, making it a secure, straightforward process for company directors.
- All compliance and communication with authorities is upheld by the insolvency practitioner.
- Liquidators’ fees can be covered by directors’ redundancy payments if no capital remains in the company after liquidation – you can ask us to look into your potential redundancy claim.
- Employees of the company are able to claim for redundancy pay directly from the government’s Redundancy Payments Office.
- Assets may be purchased by the director out of the CVL process – known as ‘pre-pack’ liquidation. This is subject to third part valuations on the sale of assets.
To find out more about how a Creditors’ Voluntary Liquidation would work in your company’s circumstances, get in touch today.
Creditors’ Voluntary Liquidation (CVL) is an insolvency appropriate to companies who are no longer in a position to meet their liabilities to creditors. CVL involves the complete closure of the associated company, and realisation (selling) of its assets in order to acquire the capital to repay its creditors.
The costs incurred in the process of CVL depend entirely on the nature and size of the company in question. The process relies on the appointment of a licenced insolvency practitioner (IP) as liquidator, who acts on the company’s behalf to realise assets, repay creditors, and organise all the necessary procedures for legal compliance.
The cost of a CVL will vary depending on factors such as the size of the company, number of creditors, and nature of its assets.
How we can help
If you feel as though your company is struggling to meet its liabilities to creditors, and is facing a dramatic downfall in its financial status, we can help.
Not only can we provide the necessary expertise to advise you on how CVL may be best applied to your company, but we are licensed and regulated to carry out the process from start to finish.
To discuss your company’s position, and find out how CVL could work in your situation, get in touch with a member of our advice team for free. It is crucial to act as soon as possible where unaffordable company debt is concerned. Call us today to arrange your free consultation.
Book a free telephone consultation with one of our initial advisers