This article provides a short guide about the CVL (Creditors’ Voluntary Liquidation) process and when should it be considered by business owners and directors.
What is a Creditors’ Voluntary Liquidation?
A CVL is a Creditors’ Voluntary Liquidation. This insolvency procedure is a director led process where the Company ceases to trade. Whilst this is due to the Company being insolvent (if its assets are insufficient to discharge its debts and liabilities), there are often a number of different reasons that this happened.
What may cause a business owner to consider a CVL?
The typical business challenges that we see when we are called in by the business owners/directors include:
- The Company has run out of cash
- The Company cannot pay its debts on time
- Creditors are threatening legal or bailiff action to recover debts
- The services and/or products sold by the Company appears to no longer be viable
What is the CVL Process?
As part of the process, all employees are made redundant and the appointed Liquidator will seek to realise assets for the benefit of creditors. However, here are the typical stages of a CVL:
- You will need to instruct a licenced Insolvency Practitioner as this is the only person who can act as the Liquidator
- Information will need to be provided to the proposed Liquidators office so that we can prepare a report to creditors and a statement of affairs (a snapshot of the Company’s assets and liabilities) can be drafted. Here at Opus we provide you with an easy to complete questionnaire to assist in this process
- A shareholders meeting is convened at which the shareholders to pass certain resolutions pertaining to the Liquidation
- At the same time, a creditors meeting is also convened for the creditors and for the purposes of, amongst other matters, confirming the appointment of the shareholders chosen insolvency practitioner
- The creditors meeting is ordinarily held virtually, but creditors who meet the criteria (either 10% by value of creditors or 10% in total number of creditors or 10 individual creditors) can request a physical meeting
- Following our appointment, the claims of the employees who were made redundant are processed (whilst former employees can claim pre-Liquidation, the claims cannot be processed until the Company is in Liquidation)
- Generally speaking, and as long as the required information is provided quickly, the Company can be in Liquidation within two to three weeks from the date of instruction
How much does it cost to put your Company into CVL?
The cost of a CVL depends on the complexities of the case and primarily will depend on:
- The number of creditors
- How many employees there are
- Whether there is any legal or bailiff action pending
- The assets that need to be dealt with
- The structure of the Company
Is a CVL right for your business?
A CVL isn’t always the right procedure for a business. However, action is needed to identify the clear position of the Company, and then what options are available depending on what you want to do, what is possible and the legal obligations for the Directors of the business.
If you have concerns about any of the above, speak to a Licensed Insolvency Practitioner who will be able to guide and provide independent advice to you prior to any instruction (if you decide this is required).
Opus has offices nationwide and by contacting us on 020 3326 6454, you will be able to get immediate assistance from our Partner-led team.