A Creditors’ Voluntary Liquidation (or CVL) is the procedure to wind a company up (or deal with the closure of your company) if the company is insolvent – in other words, there are not enough company assets which can be sold or realised, to pay off all the debts of the company.
How we can help you with the Creditors Voluntary Liquidation (CVL) process
A Creditors Voluntary Liquidation (CVL) procedure is to be used (rather than an Administration or a Creditors Voluntary Arrangement or CVA) if there is no part of the business that can be sold as a going concern or is worth trying to salvage. Of course, this is something that we will carefully review with you to make sure the right process is chosen to deal with your company.
Once a decision has been made by the Directors that the company is to enter CVL the trade will need to stop (if not already). We will liaise with you (and the Members) regarding the exact timing of this as we need to think about;
- Any work in progress and completion of that work if possible.
- Any creditor action such as a bailiffs being instructed or a winding up petition issued.
- Continued occupation of premises and liaising with the landlord.
- Releasing of employees and so on.
- The passing of the Special Resolution by Members to wind-up the affairs of the company.
Under new insolvency Rules introduced in April 2017, a physical meeting of creditors can only be held at the request of the requisite number/value of creditors.
We will therefore advise you if the appointment of the Liquidator in the CVL can be made by Deemed Consent or if a decision should sought from creditors using a decision making process, such as a virtual meeting.
The timescale to the Creditors Voluntary Liquidation (CVL) and appointment of the Liquidator is usually around 3 to 4 weeks after we are instructed to proceed. During this time we will assist you in the production of the Directors Report and Estimated Statement of Affairs. These documents are prepared from the company’s records, asset valuations (if necessary) and from our discussions with you about the business. These documents must be circulated to creditors before the Liquidator can be appointed in the CVL.
Appointment of the Liquidator by Deemed Consent simply means that the appointment is deemed to have been made on a set decision date, provided no creditors object to the Deemed Consent process. If the requisite number/value of creditors were to object, then the Deemed Consent process is terminated, and we must convene a physical meeting of creditors (see below).
A virtual creditors meeting will normally take the form of a conference call, in which at least one Director must participate, to answer any questions from creditors about the running and management of the business, and of its financial affairs. As creditors may also vote by proxy, it is often the situation that no creditors attend the virtual meeting and it is merely a formality. The decision on the appointment of the Liquidator in the CVL is made at the meeting. If the requisite number/value of creditors were to object, then no decision is made and we must convene a physical meeting of creditors (see below).
Where physical meeting becomes necessary, this will be held at our offices where possible. At least one Director must attend in person to answer any questions from creditors, about the running and management of the business, and of its financial affairs. Creditors may vote by proxy and the decision on the appointment of the Liquidator in the CVL is made at the meeting.
Following the formal appointment of the Liquidator in the Creditors Voluntary Liquidation (CVL), the process of the winding up of the company can commence. As Liquidator we will continue to -
- Liaise with creditors, and resolve any issues of creditor claims.
- Take steps to sell the equipment and plant.
- Commence collection of outstanding book debts.
- Carry out reports to the DTI.
- Deal with employee claims and so on.
Your in depth involvement with the company will effectively cease once the trade has stopped. You will need to liaise with us so that we can deal with all matters as effectively as possible but after the initial stages, it is likely that most matters can be dealt with by email or telephone and the occasional meeting.
After selling and realising all of the assets there may be a dividend to creditors if enough funds have been realised.
The company will eventually be struck off the Register of Companies once all the monies have been distributed and necessary clearances received. This usually takes about 2 years from the date that the company trade ceased and entered liquidation.
Griffin and King Licensed Insolvency Practitioners have also recently written an article which explains more about Company Voluntary Arrangement (CVA).