Creditors Voluntary Liquidation and Compulsory Liquidation advice for directors
06/12/2017 | Creditors Voluntary Liquidation
Creditors Voluntary Liquidation (CVL)
Under this procedure the directors take the view that the company is insolvent and cannot continue to trade by reason of its liabilities. The directors would have concluded that the business is not worth salvaging and losing money. To continue to trade would therefore only increase liabilities and risk the directors to the potential of wrongful trading.
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.
Step by step guidance is provided to Directors through the whole process.
A compulsory liquidation is a liquidation process that is a court procedure. Typically, a creditor will issue a winding up petition against the company which will be served upon the registered office of the company.
This petition will provide a date when the petition is to be heard in the court. At this hearing it is quite likely that a winding up order will be made against the company. There is usually a period of approximately 6 weeks between the date of the petition being issued and the date of the court hearing for the winding up petition to be heard.
Once a winding up petition has been issued the petition will be advertised in the London Gazette. It is quite likely that the company bankers will freeze the company bank account when they become aware that a petition has been issued (which they will do when the petition is advertised).
Once a winding up order has been made at the court hearing the winding up procedure will be initiated by the Official Receiver. It is quite likely that an Insolvency Practitioner will be appointed by the creditors at any subsequent meeting of creditors that the Official Receiver calls. The directors will have no say in the identity of the Insolvency Practitioner appointed.
You may also find our video helpful – “Difference between Creditors Voluntary Liquidation & Compulsory Liquidation - Griffin & King”.
If you require any further information please call Tim Corfield, Janet or Mark on 01922 722205. You can also contact Janet by text on 07545 806531 or email firstname.lastname@example.org. Griffin & King Insolvency Practitioners are happy to help with your Creditor’s Voluntary Liquidation or Compulsory Liquidation query. Please take a look at the testimonials of other people we have assisted.