Creditors' Voluntary Liquidation ( CVL )
Despite the title, it is the directors that commence the proceedings in this case. The directors will formally resolve that the company cannot continue to trade by reason of its debts. The directors will appoint an Insolvency Practitioner to assist with the preparation of a statement of affairs to be presented to creditors at a meeting of creditors which will usually take place within 28 days. In practice, of course, it is the firm of Insolvency Practitioners that prepare the statement of affairs.
On the day of the meeting of creditors there is also a meeting of shareholders. There must be at least 75 per cent of shareholders voting at that meeting supporting the resolution to proceed.
The Creditors’ Meeting
At least one director must attend and chair the creditors' meeting. The creditors are invited to attend this meeting and must be given at least 7 days notice. The Insolvency Practitioner will present the financial information to the creditors and will, in practice, control and assist with the smooth running of the meeting.
Questions will be invited from the creditors to the directors that they may have in connection with the information produced or generally they may have about the conduct of the directors. The creditors will take a formal vote on the appointment of the Liquidator. In practice the creditors usually appoint the same Insolvency Practitioner as the directors. The financial/statutory information that is made available is;
- Statutory information - officers of the company, registered office, etc.
- Copies of the company accounts or extracts from those accounts.
- Written report from the Directors explaining the trading history and the reasons for the company failure.
- Sworn statement of affairs summarising the company's assets and liabilities.
- Schedule of the company's creditors.
- Deficiency account dealing with the overall losses in the final period of trade.
Duties of the Liquidator
- To maximise the realisation of the assets.
- To bring and defend legal proceedings.
- To agree creditor claims and to pay dividends to the company creditors.
- To report to the Insolvency Service at the Department of Trade and Industry (DTI) within 6 months into the conduct of the directors.