Creditors’ Voluntary Liquidation
Suitable for: Insolvent companies who want to wind-up company affairs
The Creditors’ Voluntary Liquidation (CVL) is the most common form of corporate liquidation and out-of-court winding-up of an insolvent company. Once your company’s shareholders resolve to wind-up the company affairs, an insolvency practitioner will need to be appointed. The company will cease to trade, if it has not done so already. A meeting of creditors will be called and the directors will need to report on the company affairs.
The liquidator will then wind-up the affairs of the company and your company’s assets will be sold with the proceeds being used to pay the liquidation expenses and giving a dividend to the creditors.
After the liquidation, your company will be struck off the Companies House Register and it will cease to exist as a legal entity.
Advantages of a CVL:
– The directors and shareholders can control the timing
– The process of placing the company into liquidation can be done within hours of the first meeting
– It helps to reduce the risk of ‘wrongful trading’ and prevents further debt
– It eases the pressure of creditors and the bank as bad debts are written off
Disadvantages of a CVL:
– The liquidator carries out an investigation into the conduct of the directors
– Personal guarantees may be triggered
– There is a small, or no return for the shareholders and directors, and the return for creditors is low
– The likelihood of continued trade is low
– Any tax losses built up on the period prior to liquidation are lost