If a company is no longer profitable, is unsellable, or has significant liabilities, then it may be necessary for the business to cease to trade and enter CVL.
What is a Creditors’ Voluntary Liquidation (CVL)?
A Creditors’ Voluntary Liquidation (CVL) is a formal liquidation process which brings about the end of an insolvent company. This type of company liquidation is a formal insolvency procedure and can only be entered into under the guidance of an appointed liquidator who must be a licensed insolvency practitioner. A CVL is used when an insolvent company can no longer meet its financial obligations or manage its debts.
Understanding the CVL Process
A Creditors’ Voluntary Liquidation (CVL) is the process whereby the insolvent company is taken into liquidation voluntarily by the directors with the support of a licensed insolvency practitioner. The appointed practitioner plays a crucial role in the liquidation process, undertaking responsibilities such as identifying and realising the value of company assets, liaising with outstanding creditors, and ensuring the business is brought to an orderly closure. This includes removing the company’s name from the register held at Companies House. The process aims to ensure a fair distribution of assets among shareholders and creditors while providing a structured resolution to the financial challenges faced by the business.
Why Choose a CVL for Your Company Liquidation?
There are advantages and disadvantages to opting for a Creditors’ Voluntary Liquidation (CVL). The key advantages include relieving creditor pressure, addressing outstanding creditors, and avoiding actions like compulsory liquidation. During a CVL directors can also explore options for director redundancy. However, the CVL may result in reduced control over the business and could potentially affect the directors’ reputations, making it an important decision to approach with careful consideration.
A Creditors’ Voluntary Liquidation can be a good option for a company facing insolvency as it is less aggressive than compulsory liquidation, allowing the directors to retain some control over the process and avoid the risks of court intervention.
Key Advantages of a CVL
While a Creditors’ Voluntary Liquidation is an effective method of dealing with an insolvent company. However, it is always critical to consider every other available alternative before embarking on an insolvent liquidation. Depending on your situation, the following could also be explored:
- Informal Arrangements with Creditors
- Company Voluntary Arrangement (CVA)
- Administration
- Pre-pack Administration
Each option has its merits and shortfalls; thus, professional advice is very important for one to come up with the right path to tread.
How we can help you
We realise that this is an exceedingly challenging time for owner-managed businesses, and we can assist in ensuring that this process is conducted professionally and with respect for the client.
At RMT, we understand how serious formal insolvency proceedings are, and that your company may require the services of a licensed insolvency practitioner to guide you through this difficult time. We offer an initial consultation with immediate support and expert advice in determining the most appropriate course of action for your individual situation.
Whether this is negotiating with the creditors, realizing value in the assets of the company, or the liquidation process proper, we press forward to make sure that the conduct of the procedure is efficient at high levels of professionalism. Our objectives here are aimed at reducing unnecessary stress and interference with your business, while we continue to be caring and respectful.