The Creditors’ Voluntary Liquidation Process
A Creditors’ Voluntary Liquidation (CVL) is the most common director-led insolvency procedure.
Company law means that an insolvent company can be closed down without personal liability resting at the door of the company directors or shareholders.
Please refer to the 12 Q&A links below for key details regarding this service.
- What is an insolvent company?
- Is my company insolvent?
- The balance sheet test
- The cash flow test
- What is a Creditors’ Voluntary Liquidation?
- What is a creditors meeting?
- Can I restart after a Creditors’ Voluntary Liquidation?
- Will I be disqualified if i’m a director of a company that goes into Creditors’ Voluntary Liquidation?
- Will I be personally liable for the company losses?
- How much will a Creditors’ Voluntary Liquidation cost?
- Can I have a meeting to explain a Creditors’ Voluntary Liquidation to me?
- Do I need to pay for the company assets as well as pay for a Creditors’ Voluntary Liquidation?
1. What is an Insolvent Company?
2. Is my Company Insolvent?
Failure of either the below two tests can indicate company insolvency. Company and Insolvency Law allows for an insolvent company to be closed down and for creditors to be left unpaid or paid in part or in full.
3. The Balance Sheet Test
4. The Cash Flow Test
5. 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.
6. What is a Creditors Meeting?
A creditors meeting is the meeting that is held to place a company into liquidation. It will follow the meeting of shareholders.
At least one Director of the company must attend the creditors meeting and the creditors of the company may attend and ask the director questions.
Various information will be presented to the creditors during the meeting including a financial summary of the company and an explanation of the circumstances regarding the company’s insolvent state.
7. 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 the assets and trade of the insolvent company from the Liquidator.
The legislation will also allow for the re-use of a former trading style or name of the insolvent company (if correct procedure is followed).
8. 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 and in truth, disqualification is not the normal outcome.
It is usually the more extreme cases of unfit director conduct that may lead to disqualification action being taken.
9. Will the director be personally liable for the company losses?
In general, no they won’t.
If they have made a personal guarantee to a company creditor/s then they may be called to pay this under their guarantee.
10. What are the costs for this liquidation procedure?
A Creditors’ Voluntary Liquidation at Insolvency.com will cost from £2,500 fully 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. This initial consultation is free of charge.
11. Can I have a meeting to explain this procedure to me?
At Insolvency.com we will offer to meet all cases and explain all options available to your company. We will travel to a convinient location to you for this meeting and it is a no-charge service we provide.
12. Do I need to pay for the company assets as well as pay for the liquidation?
No. In most cases the cost of the liquidation can be met from the value of assets sold.
If you are buying back the assets yourself then there will be a requirement to pay for the assets and liquidation separately.