Creditors Voluntary Liquidation CVL

Creditors Voluntary Liquidation CVL Written by John A Waller. Consultant. Updated May 27th, 2024.

Contents hide

Liquidation – the realisation of assets.

A Creditors’ Voluntary Liquidation CVL enables Directors to formally close an insolvent company voluntarily. Directors often choose to take control of continued creditor pressure and looming Winding Up Petition.

Company Directors can choose from three types of liquidation to close their limited company:-

A Creditors Voluntary Liquiation CVL

The liquidation of an insolvent limited company.

A licensed insolvency practitioner at HBG Advisory can act as a company’s liquidator and assist directors with the shareholders and commence the process.

Importantly, company directors must seek advice early to understand their responsibilities. The directors of an insolvent company must minimise creditor losses. Not doing so could make company directors liable.

A CVL’s advantage is the power to select the liquidator, which is not the case in a compulsory liquidation. Once appointed, the liquidator sells company assets to facilitate distribution to creditors.

I need to liquidate my limited company.

A Creditor Voluntary Liquidation CVL is a legal voluntary insolvency process for companies. The directors advise the shareholders that the company is insolvent and therefore no longer viable. They need shareholder approval to appoint a Liquidator (licensed Insolvency Practitioner). A meeting of the company’s creditors is called while giving 14 days’ notice. Creditors vote to select the nominated liquidator. The meeting is held virtually, unless 10% of the creditors by value of 10%, vote to meet in person.

Once appointed, the Liquidator then:

  • Assumes responsibility for the CVL process;
  • Realises the assets of the Company;
  • Pays creditors of the Company in order of priority;
  • Terminate employees’ employment with the Company;
  • And close the company down, then remove it from the registrar at companies house.

This is the most common form of liquidation in England & Wales for insolvent limited companies, and ends the operation of the limited company.

Company directors need clear direction on how to liquidate a company from licensed insolvency practitioners, as found with the team at HBG Advisory.

undefined

Advantages and Disadvantages of Creditors Voluntary Liquidation CVL

Advantages-

  • Directors have more control than in compulsory liquidation;
  • Prompt relief from pressure from creditors;
  • Decreased chance of wrongful trading and directors ban;
  • Option to buy the assets back.

Disadvantages

  • Overdrawn directors loans require repayment;
  • All employees and directors made redundant;
  • company assets sold;
  • Liquidator investigates your term as a director on how you conducted yourself;
  • Personal Guarantees crystallised for repayment
  • Shareholders may have to repay illegal dividends (not paid out of profit).
  • Insolvency advertised in the London Gazette;
  • Shareholders often remain unpaid.

Company Director redundancy

Appointing an insolvency practitioner to liquidate your company has a cost. If the company has no assets to pay for the process, the liquidator will look to the directors to pay their fee. However, directors may pay the fee if they receive their remuneration as company employees and through the company’s PAYE scheme. In these scenarios, company directors remain eligible to claim redundancy once the company enters an insolvent liquidation with the other employees. So, if directors qualify? It enables them to proceed with voluntarily, rather than a compulsory liquidation.

Can a court order liquidate a company?
A court order can force a company into compulsory liquidation if a company is insolvent. However, a voluntary process is called a CVL. Who can put a company into liquidation? A CVL is a director-initiated insolvency process that a licensed insolvency practitioner must administer.

Voluntary Creditors Liquidation CVL?

Often people refer to ‘Creditors Voluntary Liquidation‘ as ‘a Voluntary Creditors Liquidation.

Why would a director Voluntary Liquidate their Company?

Directors seek the help of licensed insolvency practitioners if their company is financially suffering. So if the company has:

What happens in a Creditor’s Voluntary Liquidation CVL?

Stage 1. Seek a reliable, experienced Insolvency Practitioner, as found in HBG Advisory;

Stage 2. Collate company asset details for valuation by an independent valuer;

Stage 3. Collate liabilities of the company, ensuring all details of the creditor, along with amounts due, included;

Stage 4. Handover all books, computer accounting records and statutory books to HBG Advisory for Liquidation;

Stage5. Hold creditors meeting chaired by a former director with creditors online, unless a physical meeting is required. (See above).

Once the liquidator was voted into office, the former directors no longer held office. However, they may be required to assist the liquidator in their statutory duties.

CVL remains a cheaper process than a Company Administration. However, opting for Company Administration protects the business from creditors while it sorts itself out.

What is the difference between Voluntary Liquidation by members and creditors?

Voluntary liquidation by members, known as Members Voluntary liquidation MVL, refers to a solvent company that pays all debts of the company within 12 months of the liquidation appointment.

HBG Advisory provides clients with Fixed Price MVL

If a CVL is due, the company cannot either pay its debts as and when due, or its liabilities are more significant than its assets. So, the creditors of the company vote to appoint a liquidator.

Book a Virtual Meeting - Free Confidential Advice
If you need help understanding the best way forward for your company, we can provide confidential free initial advice. You can book a free virtual meeting or call us on 0800 612 5448..
Creditors Voluntary Liquidation

What is a Creditor of a Company?

Company creditors. – Companies and individuals who have provided goods or services to the company and therefore owed money. Creditors include HMRC (Crown Preference), company bankers (usually secured if owed money) and other finance suppliers, including leases, rental purchases and landlords.

What is Trade Creditor?

Trade creditors. – Usually a supplier of goods for resale or production materials for the company. So once in liquidation, they are classified as unsecured creditors unless they have a guarantee of security in the event of a default.

What happens to unpaid creditors?

Once appointed, the licensed insolvency practitioner, acting as liquidator, deals with all unpaid creditors and ensures the company’s assets are realised. This allows the liquidator to distribute available funds as soon as creditors have proven the debt with the liquidator. Payment is given priority according to the creditor’s class.

The creditors of the company fall into the following category for payment by the liquidator: –

  1. Secured creditors with a fixed charge – Asset-based lenders (Machinery, Planes & Cars) along with Banks (Buildings, Land).
  2. Preferential creditors – Employees of the company with outstanding arrears of wages and holiday pay.
  3. Secured creditors with a floating charge – Creditors holding a form of security over moveable assets like materials, stock, office furniture and fixings.
  4. Unsecured creditors of the company – Trade creditors without any form of security (Suppliers) & finance agreements unsecured (Credit Cards & loans).
  5. The Shareholders of the company – Shareholders remain paid last once all other creditors have been paid in full.
  6. Usually, shareholders receive no payment in a CVL

Can creditors object to voluntary liquidation?

Even though there is no automatic stay (or halt) on legal proceedings against a company in voluntary winding up, a liquidator or another contributory or creditor may go to the court to request the court stop proceedings.

Limited companies and limited liability

Limited companies are separate legal entities. Therefore, they operate individual finances for shareholders. It, therefore, ensures that shareholders remain independent and do not have personal liability for company losses, debts or legal claims against the Limited Company.

So limited liability within the structure of a limited company remains the main reason for the operation of a limited company, along with tax benefits. Limited companies safeguard company shareholders, and the only exposure they have is to lose their value in the shares initially invested.

Insolvency Planning for a CVL

How do I liquidate my limited company?

However, the company’s directors must consider the liquidation process. Pre-liquidation solvency planning helps understand and plan what is necessary. Ensure that a professional review enables directors to maintain initial control:

By taking the opportunity to meet with an insolvency practitioner. Company directors can avoid trading while insolvent.

Therefore, the original report must cover:

  • Compile an enquiry pack;
  • Critique the Company’s previous accounts filed going back at least five years;
  • Audit charges registered over company assets;
  • Measure former financial forecasts against actual;
  • Company’s customers and its position in the market;
  • Company’s critical processes adopted and improvements needed;
  • Directors retirement strategy;
  • Agree on company directors loan accounts;
  • Ensure all options are available.

Therefore, conducting a pre-insolvency review can open up other options than liquidation.

Can I Liquidate My Company?

No. Only a licensed insolvency practitioner takes the appointment.

Why may I need a validation order?

When liquidating a company, its assets are used to pay off its debts. Any money left goes to shareholders. You’ll need a validation order to access your company’s bank account.

If this money has not been shared between shareholders until the company is removed from the register, it will go to the state.

You will have to restore your company to claim back money after it has been removed from the register.

Can’t pay VAT Options?

Can I therefore liquidate?

Yes, seeking an appointment with a licensed insolvency lawyer is important. They will establish the company’s debt before advising liquidation.

Other options exist, negotiating a time to pay with HMRC, a Company Voluntary Arrangement (CVA) explained, and a Company Administration.

When Is A “CVL” Suitable to Use?

To close an insolvent company while providing quick procedure, and may commence in ten working days.

How Long Is The Procedure?

Dependent on the realisation of company assets?

Can you dissolve a company with a Bounce Back Loan?

As the UK economy recovers from the Coronavirus pandemic. Company directors ask, can you dissolve a company with a Bounce Back Loan?

No.

However, if your company cannot make payments, you need to seek a licensed Insolvency Practitioner to liquidate your company.

Cost?

The cost depends on many factors:-

  • Size of the Company;
  • Company assets values;
  • Number of creditors;
  • Workforce numbers;
  • Number of company locations;
  • Any hazard issues;
  • Is the limited company solvent or insolvent?

A basic MVL starts at £950 plus VAT.

A simple CVL starts from £3,000 plus VAT.

The above price excludes disbursements.

For further help on how do I liquidate my company? Please contact HBG Advisory on:

  • FREEPHONE 0808 280 3624
  • Book a confidential free VIRTUAL meeting safe and private online.
  • Join web chat found on the bottom right of the webpage.
Free Confidential Advice
We don’t need personal or company details to answer initial questions on your situation: You can book a free virtual meeting or call us on 0800 612 5448.

What is A Creditor of a Company?

Company creditors. – Companies and individuals owed money by the company. Creditors usually include HMRC (Crown Preference), company bankers (usually secured if owed money) and other finance suppliers, including leases, rental purchases and landlords.

What is A Trade Creditor?

Trade creditors. – Usually a supplier of goods for resale or production materials for the company. So once in liquidation, they are classified as unsecured creditors unless they however have a guarantee of security in the event of a default.

What happens to unpaid creditors in a liquidation?

Once appointed, the licensed insolvency practitioner, acting as liquidator, deals with all unpaid creditors and ensures the company’s assets are realised. This therefore allows the liquidator to distribute available funds as soon as creditors have proven the debt with the liquidator. Payment is given priority according to the creditor’s class.

The creditors of the company fall into the following category for payment by the liquidator: –

  1. Secured creditors with a fixed charge – Asset-based lenders (Machinery, Planes & Cars) along with Banks (Buildings, Land).
  2. Preferential creditors – Employees of the company with outstanding arrears of wages and holiday pay.
  3. Secured creditors with a floating charge – Creditors holding a form of security over moveable assets like materials, stock, office furniture and fixings.
  4. Unsecured creditors of the company – Trade creditors without any form of security (Suppliers) & finance agreements unsecured (Credit Cards & loans).
  5. The Shareholders of the company – Shareholders remain paid last once all other creditors have been paid in full. Usually, shareholders receive no payment in a CVL

Limited companies and limited liability

Limited companies are separate legal entities. Therefore, they operate individual finances for shareholders. It therefore ensures that shareholders remain independent and do not have personal liability for company losses, debts or legal claims against the Limited Company.

So limited liability within the structure of a limited company remains the main reason for the operation of a limited company, along with tax benefits. Limited companies safeguard company shareholders. However, the only risk they have is to lose their value in the shares initially invested.

Insolvency Planning for a Creditor’s Voluntary Liquiation CVL.

How do I liquidate my limited company?

The company’s directors must consider liquidation. Pre-liquidation solvency planning helps understand and plan what is necessary. Ensure that a professional review enables directors to maintain initial control:

By meeting with an insolvency practitioner. Directors can avoid trading while insolvent.

Therefore, the original report must cover:

  • Compile an enquiry pack;
  • Critique the Company’s previous accounts filed going back at least five years;
  • Audit charges registered over company assets;
  • Measure former financial forecasts against actual;
  • Company’s customers and its position in the market;
  • Company’s critical processes adopted and improvements needed;
  • Company Directors retirement strategy;
  • Agree on company directors loan accounts;
  • Ensure all options are available.

Therefore, conducting a pre-insolvency review can open up other options than a Creditors Voluntary Liquidation CVL.

Can I perform a Creditors Voluntary Liquidation CVL of my Company?

No. Only a licensed insolvency practitioner takes the appointment.

Can’t pay VAT Options?

Can I therefore liquidate?

Therefore, seeking an appointment with a licensed insolvency lawyer is important. They will establish the company’s debt before advising liquidation.

Other options exist, negotiating a time to pay with HMRC, a Company Voluntary Arrangement (CVA) explained, and a Company Administration.

When Is A “Creditors Voluntary Liquidation CVL” Suitable to Use?

A CVL is suitable for the closure of an insolvent company. Therefore, putting a limited company in a CVL offers a quick procedure and may commence in ten working days.

How Long Is The Procedure For A Creditor’s Voluntary Liquidation CVL?

Dependent on the realisation of company assets?

Can you dissolve a company with a Bounce Back Loan?

As the UK economy recovers from the Coronavirus pandemic. Company directors ask, can you dissolve a company with a Bounce Back Loan?

No.

However, if your company cannot make payments, you need to seek a licensed Insolvency Practitioner to liquidate your company with a Creditors Voluntary Liquidation.

For further help on how do I liquidate your company? Please contact HBG Advisory on:

  • FREEPHONE 0808 280 3624
  • Book a confidential free VIRTUAL meeting safe and private online.
  • Join web chat found on the bottom right of the webpage.
Support Is Just A Call Away
Business recovery for distressed directors and limited companies.
Free advice from approachable team of advisors.Tel: 0800612 5448
Liquidation and Bounce Back Loans
Liquidation and Bounce Back Loans
Liquidation and Bounce Back Loans
Liquidation and Bounce Back Loans
Business Recovery & Rescue.
Liquidation Specialists.
Experts in dealing with Company Debt

    Get Help Today

    1. Name: (*)

    2. Company Name:

    3. Telephone: (*)

    4. Email:

    5. Message:

    *Required Fields

    CALL TODAY FOR
    EXPERT CONFIDENTIAL ADVICE

    0330 056 3120

    Further Reading