Creditors’ Voluntary Liquidation
Company law means that an insolvent company can be closed down without personal liability resting at the door of the company directors or shareholders.
A Creditors Voluntary Liquidation CVL is the most common Director led insolvency procedure.
What is an Insolvent Company?
There are two tests of insolvency, a balance sheet test and a cash flow test.
The Balance Sheet Insolvency Test
If the company’s balance sheet shows that it owes more that it owns. In other words if it has a minus overall balance sheet then it may be evidence of the insolvency of the company.
The Cash Flow Insolvency Test
If the company is not paying and cannot pay those it owes money to when it is due to pay then this can be evidence of insolvency.
More often it is worsening of this late or inability to pay that evidences insolvency.
Is My Company Insolvent?
Failure of either test can indicate company insolvency. Company and Insolvency Law allows for an insolvent company to be closed down and for creditors (those who are
owed money be the company) to be left unpaid in part or in full.
What is a Creditors Voluntary Liquidation?
The formal process of a Creditors Voluntary Liquidation means that an insolvent company can be closed in an official and professional manner.
This will bring an end to further enforcement action by creditors and harassing letters and phone calls from creditors.
What is a S.98 Creditors Meeting?
A S.98 creditor meeting is the meeting that is held to place a company into Creditors Voluntary Liquidation. It will follow the meeting of shareholders held to achieve the
At least one Director of the company must attend the S.98 creditors meeting and creditors of the company may attend and ask questions of the Director.
Various information will be presented to the creditors meeting including a financial summary and an explanation of the circumstances of the company’s insolvency.
More often than not creditors choose to receive this information by post rather that attending the meeting.
Can I Restart After a Creditors Voluntary Liquidation?
Firstly there is no instant ban on being a company director again if you were the director of an insolvency company.
There is also no restriction on you buying, for value, the assets and trade of the insolvent company from the Liquidator.
The legislation will also allow, if procedure is followed, for the re-use of a former trading style or name of the insolvent company.
Will I Be Disqualified if I’m a Director of a Company That Goes Into Creditors Voluntary Liquidation?
Not necessarily. Any decision on disqualification is not taken by the appointed Insolvency Practitioner.
A Government department will make that decision, in truth disqualification is not the norm.
It is usually the more extreme cases of unfit director conduct that may lead to disqualification action being taken.
As a former director of an insolvent company you will have the right to defend any disqualification proceeding bought against you.
Will I Be Personally Liable for the Company Losses?
In general, no you won’t.
If you have personally guaranteed company creditors then you may be called to pay under your guarantee.
Also, if you have act in breach of insolvency legislation then you could be also potentially face fines or orders to repay monies to the company.
How Much Will a Creditors Voluntary Liquidation Cost?
A Creditors Voluntary Liquidation at Insolvency.com will cost from £2,500 inclusive.
For this you will get an Insolvency Practitioner led procedure complying with all legislation.
You will also be offered a pre-instruction meeting to discuss your company’s position and to help you see a way through the legislative jargon and process.
Can I Have a Meeting to Explain a Creditors Voluntary Liquidation to Me?
At Insolvency.com we will offer to meet all cases and explain all options available to your company.
This will include insolvency options such as a Creditors Voluntary Liquidation, Company Voluntary Arrangement and Administration along with other informal options.
Do I Need to Pay for the Company Assets as well as Pay for a Creditors Voluntary Liquidation.
No, in most cases the costs of the Creditors Voluntary Liquidation can be met from the value of assets sold. This will mean that if you are buying back the assets there will more often than not be not requirement to pay for the assets and liquidation separately.