CVL
(Creditors Voluntary Liquidation)
A CVL is where the directors of a distressed company voluntarily put their business into liquidation, with permission of the shareholders. If you are a director of a distressed company – we can walk you through the liquidation process.
cvl explained
What Is A CVL?
- It’s the most common type of liquidation in the UK.
- It’s used for companies that are insolvent, no longer viable, have run out of cash and cannot pay their liabilities on time.
- It’s a voluntary option initiated by the Company’s Directors although it’s the Shareholders who have to pass the relevant resolutions to wind up.
- Usually, the Company will cease trading straight away and the Bank account will no longer be operated.
- Any assets are realised following the liquidator’s appointment and, after the deduction of costs, any remaining funds are distributed to the company creditors in order of the priority.
- The existing Directors, management or employees may submit an offer to buy the assets from the liquidator who will have obtained a professional valuation.
- There are strict rules in place in respect of the re-use of company trading names following liquidation, which we can explain further if necessary.
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What Are The Advantages Of A CVL?
- By ceasing to trade and dealing with the company’s insolvent position quickly and professionally it will reduce the risk of wrongful trading.
- It allows the Directors to move on and provide them much needed peace of mind.
- The Directors are not prevented from acting as Directors of other Limited Companies, unless they are subject to a disqualification order.
- The employees, including the Directors, will receive any entitlement they have in respect of Redundancy Pay, Pay in Lieu of Notice, Arrears of Wages, Holiday Pay etc. Payments will be made from the Redundancy Payments Service but are subject to statutory limits.
- It is possible for the Directors to acquire the assets of the Company at market value and continue in the same line of business.
- Creditors Meetings can now be held “Virtually” i.e. by webcam or conference call, avoiding the stress of a “physical” meeting, unless sufficient creditors request otherwise.
- The costs are generally less than in Compulsory Liquidation thus improving dividend prospects for Creditors.
In Your Corner
What Does The Liquidator Do, Once Appointed?
These include, but are not limited to the following:
- Realise the Company assets.
- Liaise with Creditors regarding the progress of the liquidation and dividend prospects.
- Deal with employee claims.
- Carry out statutory investigations into the Company’s affairs and the Directors conduct.
- Report to the Insolvency Service on the Directors conduct.
- Advertise in the London Gazette and liaise with the Registrar of Companies, HM Revenue and Customs.