Creditors Voluntary Liquidation

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

Once appointed, the Liquidator then:

• 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 limited companies, and ends therefore the operation of the limited company.

Voluntary Creditors Liquidation?

Often people refer to ‘Creditors Voluntary Liquidation‘ as ‘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:

• Its creditors chase overdue accounts;
• Fighting legal action;
• Can’t pay back your Bounce Back Loan?
• Severe cash flow issues (Run out of Cash);
• Debts growing out of control;
• Unable to pay creditors as and when due;
• Risk of wrongful trading
• Can’t pay VAT Options
• Are PAYE arrears pulling your company down?
• Can’t pay Corporation Tax – what next?

The process of a liquidation stage by stage:

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 Liquidator voted into office, the former directors no longer hold office. They may be required to assist the Liquidator in their statutory duties.

Creditors Voluntary Liquidation remains a cheaper process than a Company Administration. However, opting for a Company Administration ring fences available business from creditors whilst 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 Creditor’s Voluntary Liquidation is due, the Company cannot either pay its debts as and when due, or its liabilities are more significant than its assets. So, creditors of the company vote to appoint a liquidator.

What is a Creditor of a Company?

Company creditors. – Businesses and individuals who have supplied goods or services to the Company and therefore owed money. Creditors also include HMRC (Crown Preference), the company bankers (Usually secured if owed money) and other finance suppliers, including leases, hire purchases, and Landlords.

What is Trade Creditor?

Trade creditors. – Usually a supplier to the Company of goods for resale or manufacturing materials. They are ranked as unsecured creditors in Liquidation, unless creditors hold a guarantee of security in the event of a default.

What happens to unpaid creditors in a liquidation?

Limited companies and limited liability

Limited companies are separate legal entities. Therefore, they operate individual finances to the shareholders. Thus, it ensures that shareholders remain distinct and have no personal liability for company losses, debts, or legal claims against the Limited Company.

Limited liability within the structure of a limited company remains the primary reason for therefore operating 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 Creditors Voluntary Liquidation

Company directors need however to consider the process of liquidation. A pre-liquidation strategy meeting helps understand and plan what is required. Ensuring a professional review allows directors to maintain initial control:

The initial report needs to 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 available.

Carrying out a pre-insolvency review may open up other options, other than liquidation.

Can I Liquidate My Company?

No. Only a licensed insolvency practitioner takes the appointment.

Can’t pay Vat Options?

Can I therefore liquidate?

So it is important to seek an appointment with a licensed Insolvency Practitioner. 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?

A CVL is suitable for closing an Insolvent Company. 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?

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.

If your company is unable to make payments, you need to seek a licensed Insolvency Practitioner to liquidate your company with a Creditors Voluntary Liquidation.

Cost of a liquidation?

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 Members Voluntary Liquidation costs £850 plus vat.

A simple Creditor, Voluntary Liquidations 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 0800 612 5448
• Book a confidential free VIRTUAL meeting safe and private online.
• Join web chat found on the bottom right of the webpage.