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Creditors Voluntary Liquidation (CVL)

What Is A CVL?

A Creditors Voluntary Liquidation (CVL) is a formal insolvency procedure and is the most common form of liquidation in use in England and Wales to formally bring to an end the operation of a company 

If you believe your company is insolvent and is unable to trade out of its current problems, as a Director you have a legal responsibility to seek professional advice.
If you continue to trade whilst insolvent you may be found guilty of wrongful trading.

A company is insolvent when :

  • The company cannot meet its debts as they fall due, or
  • The value of its assets is less than the total debt that it owes; or
  • The company cannot meet its debts as they fall due and has assets worth less than the total that it owes.

Typically a company that decides to implement a CVL has heavy pressure from creditors and poor cash-flow.

What a CVL is Not

A CVL is not a ‘Compulsory’ Liquidation.
Compulsory liquidation or "winding up" is a court-based procedure under which the assets of a company are realised and distributed to the company's creditors. The procedure is started by the filing (or "presenting") of a petition at court usually by a creditor.

By allowing your company to go into Compulsory Liquidation, some of the repercussions could be:

  • Future credit terms from lenders and trading partners could be adversely affected
  • Banks, accountants, solicitors etc may take a poor view of directors who allowed this to take place, rather than taking control of the situation.

Benefits of a CVL for Directors

A quick and cost effective way of formally closing down a company
Ensures they are complying with their duties as a director
Provides a clean break so they can move on
Ends pressure from creditors
Allows them to negotiate with creditors regarding personal guarantees
May minimise directors' exposure with respect to wrongful trading action.

Benefits of a CVL for others:

It enables creditors to submit their claims in a controlled manner
Employees that are made redundant will still receive any redundancy payments due from the Redundancy Payments Office (subject to limitations).
It can be possible for directors or shareholders to purchase company assets at market value and trade again in a similar line of business.

What Happens Next

When you contact us, we will set up a meeting with you and anyone else you might want to involve.  
We will listen to your situation and work to find the best solution. This advice is free of charge.

When you appoint us, you will be provided with a Payment Request and Letter of Engagement and you will be asked to provide us with some detailed information

The first step in placing the company into Liquidation would be to convene a Board Meeting of Directors where the director(s) will sign the necessary paperwork confirming that the company is insolvent and that steps will be taken to place the company into Liquidation. We will provide you with all the documentation that you will need to sign and return to us.

The Meetings of Members is usually held immediately before the Meeting of Creditors on the same day, approximately two weeks after the Board Meeting. It is at these meetings that the company will be formally placed into Liquidation.

To discuss if a CVL is the right solution for your company call us on 01656 661426 or
fill in the Contact form and we will get back to you

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