Creditors' Voluntary Liquidation (CVL)

For the distribution of assets to creditors

What is creditors voluntary liquidation?

When a business has basically run its course, has no money or valuable assets with which to pay off debts and has no feasible avenue to continue trading, it may be necessary to choose Creditors' Voluntary Liquidation (CVL).

CVL means the company is being brought to an end and will cease trading; assets will be turned into funds that can be dispersed among its creditors.

This is a quick and final solution to a company's serious financial problems.

There are many options available to companies in severe financial difficulties and Creditor Voluntary Liquidation should only be considered as the last option.

Good indicators as to if it should be considered are if the company is insolvent, it has ceased to be viable, there is no need for the company's services or products and the directors believe the company is beyond rescue.

What is the creditors' voluntary liquidation process?

The directors of the company must all agree that the company cannot continue to trade and must therefore be put into liquidation. Meetings should be held, chaired by the managing director, to resolve the company liquidation issues with shareholders and creditors.

Insolvency practitioners (IP) are appointed by the company and will usually take care of the liquidation process and paperwork procedures. They will prepare statutory reports and oversee meetings which must take place during the liquidation process.

The liquidation process can be daunting and may seem difficult, which is why a professional insolvency practitioner will handle activities during and after liquidation. They will require up to date information about the company in order to help the process run smoothly.

What are the advantages of Creditors' Voluntary Liquidation?

• CVL can put an end to worry and uncertainty
• The creditors' interests will be maximised
• Minimise directors' exposure to wrongful trading
• Directors' conduct could be investigated by an insolvency practitioner (advantage for the creditors)

What are the disadvantages of creditors voluntary liquidation?

• The conduct of the directors' will be investigated to determine if they are personally liable
• Small, if no return for shareholders and directors
• Low return for creditors
• Likelihood of continued trade is low

If you feel that the criteria for CVL applies to you, also have a look at the information about the members voluntary liquidation (MVL) as this may be the type of insolvency service required for your company and business.

Send your query

Fill in your details for a quick response