Creditors’ Voluntary Liquidation (CVL)

A Creditors’ Voluntary Liquidation (CVL) is a formal insolvency procedure that is used to wind up a company. A CVL is initiated by the company’s directors, who propose to put the company into liquidation and appoint a liquidator.

A CVL mean you keep more control, and have more say in closing the company on your terms.

A CVL can be used by a company that is insolvent (unable to pay its debts) and where the directors believe that liquidation is the best option for the company and its creditors.

How does a CVL work?

A CVL typically follows these steps:

  1. The company’s directors pass a resolution to wind up the company and appoint a liquidator.
  2. The liquidator is appointed by the creditors.
  3. The liquidator takes control of the company’s assets and liabilities.
  4. The liquidator sells the company’s assets and distributes the proceeds to the creditors.
  5. The company is dissolved.

Who can be a creditor in a CVL?

Any person or business that is owed money by the company can be a creditor in a CVL. This includes employees, suppliers, landlords, and other businesses.

What are the benefits of a CVL?

  • It allows directors to potentially close an insolvent company with no further liability, (unless debts have been personally guaranteed.).
  • It can provide a more orderly wind-down of the company’s affairs.
  • It can give creditors a better chance of recovering their debts.

Also is allows you to close a potentially insolvent company with no further liability, this is, unless debts have been personally guaranteed

A CLV shows creditors you have done the right thing by taking professional advice and can steer you away from the implications of wrongful trading.

What are the drawbacks of a CVL?

  • It can damage the company’s reputation.
  • It can make it more difficult for the company’s directors to obtain credit in the future.
  • It can result in the loss of jobs.

When should a company consider a CVL?

A company should consider a CVL if it is insolvent and where the directors believe that liquidation is the best option for the company and its creditors.

If you are considering a CVL, it is important to seek professional advice from an insolvency practitioner. An insolvency practitioner can assess your company’s financial situation and advise you on the best course of action.

Additional things to keep in mind about CVLs:

  • A CVL is a legal process, and it is important to follow the correct procedures.
  • The liquidator has a duty to act in the best interests of the creditors.
  • The creditors have the right to challenge the liquidator’s decisions.
  • The CVL process can take several months to complete.

If you are considering a CVL, it is important to understand the process and the potential risks and benefits involved.