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Creditors Voluntary Liquidation Benefits & Disadvantages

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CVL Advantages & Disadvantages?

CVL Advantages and Disadvantages

When a company enters into cvl it benefits you, your company and its creditors, however, while stopping action against the directors of an insolvent company. Immediately. For further reading, please view ‘What is creditors voluntary liquidation‘.

  1.  Stops immediate creditor action;
  2.  Avoid CCJ or Winding Up Order; The appointed liquidator has a duty to examine the reason for the failure of the business. Additionally, they are therefore required to examine the former conduct of the companies directors up to their appointment.
  3.  Once appointed, our Liquidator deals with all creditors. Therefore, directors no longer have to deal with companies creditors unless a personal guarantee is in place. The Liquidator and their team then conduct future communications.
  4.  Staff will then claim lost pay and redundancy payments where applicable;
  5.  Claim redundancy as a Director, average £9k of successful claims;
  6.  Eliminate stress; Perhaps the principal benefit of liquidation is that it’s a decisive conclusion to the company. Liquidation therefore draws a line, allowing former directors to move on with a new business.
  7.  Plan your future; Act Now! Don’t use your personal funds to prop up the business. (especially using credit cards) If however you believe you are digging a hole, then stop. It will only therefore get deeper.

What do we do for you?

  •  Assess your current situation re cash flow and debts;
  •  Advise if there is then a possibility to rescue the business.

Advantages of a CVL

Liquidation benefits – Could some assets be sold?

  •  Would a Company Voluntary Arrangement seek protection from creditors and therefore continue trading? Please read Limited Liability meaning for further detailed assistance;
  •  Assess your position regarding any personal guarantees, directors loan accounts, directors redundancy pay;
  •  Appoint a licensed insolvency practitioner if a Creditors Voluntary Liquidation (CVL) is therefore the best solution. They then take over all dealings with creditors and staff.
  • The sooner the decision to begin the process is made, the less the risk of fraudulent trading.

Business Liquidated in just four weeks. Leaving you free to therefore plan a new future.  You may also buy back the assets of the business and start trading again.

Control over Timing of Voluntary liquidation

The decision to initiate a Creditors’ Voluntary Liquidation requires the board to pass a resolution, then ratified by a shareholders resolution in favour. Therefore, as a director, you have control over the timing of the liquidation. Supervision over the timing allows time to prepare for liquidation. 

A CVL provides a clear advantage compared to compulsory liquidation. The creditors of the company force the company to liquidate, and the directors have no control over the timing.

Disadvantages of a CVL

Liquidation of a limited company ends the company, and it is then removed from the registrar at the company’s house. d 

Allegations of wrongful trading

Once the appointed insolvency practitioner is appointed, one of the essential roles they carry out is investigating the former conduct of those who remained directors. The liquidator must however forward a report to the Department for Business, Innovation & Skills (BIS), which is confidential and not for the eyes of any other but them. 

The report however may prompt BIS action against the directors, leading to penalties and even a director ban of up to fifteen years, and even a custodial sentence.

Personal liability for debts of the company. 

Directors personal liability for debts is usually protected by the fact that the limited company is a separate legal entity, however to a director.

However, directors may be liable if:

  • They guaranteed the creditor personally if the company defaults;
  • If the director traded while insolvent;
  • Involved in misfeasance;
  • Any other form of improper actions, including
    • Wrongful trading;
    • Fraud.

Overdrawn directors’ current accounts liability

Company directors individually repay overdrawn director’s loan accounts when in liquidation. Liquidator are empowered to request and enforce directors to repay any monies owed to the company in liquidation.

Perhaps the realisation of an overdrawn director account however answers why do directors delay taking insolvency advice?

The liquidator will sell all business assets.

The appointed liquidator of your company will then realise the value of the company’s assets to raise money and provide a dividend to creditors if available. 

All employees will be made redundant.

Once a limited company is liquidated, all employees and directors are determined redundant. They are however subject to length of service and paid through the PAYE scheme able to claim. Statutory redundancy. 

How long does liquidation process take?

A creditors’ voluntary liquidation usually takes 6 months to 1 year to complete. That process is divided into several stages: 

PLEASE ACT TODAY FOR FREE CONFIDENTIAL ADVICE REGARDING A VOLUNTARY LIQUIDATION.

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Liquidation Yes or No?
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