What is a Creditors Voluntary Liquidation?
A Creditors Voluntary Liquidation (CVL) is a process for insolvent companies.
What is a Creditors Voluntary Liquidation?
A Creditors Voluntary Liquidation (CVL) is a process that happens when an insolvent Limited Company comes to an end and closes. It is a formal procedure where a licensed insolvency practitioner is engaged by the director(s) of the company to handle the process.
This is by far the most common way that directors choose to close their company as they have an element of control over the process and who they engage, plus they are doing the responsible duty as a director of the company.
What happens in a Creditors Voluntary Liquidation?
In a Creditors Voluntary Liquidation, the company will cease to trade, and all creditors are contacted. A liquidation date is set once all relevant information is gathered from the Director. This information forms a "Statement of Affairs". The Insolvency Practitioner becomes the Liquidator of the company, whose main duties include:
- The sale of any assets of the company
- Liaising and representing the creditors
- Investigating the conduct of the directors
How much does a Creditors Voluntary Liquidation cost?
The cost of a Creditors Voluntary Liquidation can vary depending on factors such as the firm you engage and the complexity of the case, including the number of creditors involved. Generally, fees for liquidations typically range from £3,000 to £6,000 plus VAT.
It's important to note that these fees are generally the costs of placing the company into liquidation and cover the preparation of the statement of affairs (a report that goes to all creditors). Additional fees can occur once the company has entered liquidation, and these would be billed by the liquidator as time costs for work done.
It’s crucial you understand all costs relating to liquidation before engaging an insolvency practitioner, including if there are any personal implications such as directors loan accounts, as these WILL be pursued by the liquidator as they are classified as assets of the company.
Contact us today to discuss your specific circumstances and get a clear understanding of the costs involved in a Creditors Voluntary Liquidation for your company.
These fees can be paid by the assets of the company. For instance, if there is any remaining cash in the business, sale of any assets or money owed to the company (including overdrawn directors loan accounts).
If there are no assets of the company, then the directors would generally need to find the fees personally in order to instruct an Insolvency Practitioner.
How long does a Creditors Voluntary Liquidation take?
The process typically takes around 3 - 4 weeks to enter liquidation and the overall process may take between 6 to 24 months to be fully concluded.
The duration of a Creditors Voluntary Liquidation can vary depending on factors such as the size of your company, its individual circumstances, and the speed at which you can provide the necessary information.
At The Directors Helpline, we understand the liquidation process. Our experienced team will work closely with you to ensure all necessary steps are taken, and the liquidation proceeds smoothly. Contact us today to learn more about what happens during a CVL and how we can assist you.
Benefits of a CVL for Insolvent Companies
When an insolvent company has no viable future as a profitable entity, a Creditors Voluntary Liquidation can offer several benefits:
1. Control and responsibility: As a director, choosing to initiate a CVL demonstrates your commitment to fulfilling your duties and responsibly addressing the company's financial difficulties.
2. Asset realisation: The appointed Insolvency Practitioner will work to maximise asset realisation, ensuring that creditors receive the highest possible return.
3. Orderly closure: A CVL provides a structured and orderly process for winding up the company's affairs, giving closure to all involved.
4. Protection from personal liability: By following the proper legal procedure of a CVL, directors can protect themselves from potential personal liability for the company's debts – it’s important to note this is not always the case, which is why you need to seek advice from our team.
Frequently Asked Questions
There are various reasons you may put your company into a CVL, for example, your company is unable to repay its debts.
If you are worried about the financial health of your company, get in touch with our experienced team to assess all your options.Get in touch
1. The Liquidator represents the CREDITORS not YOU the director, so will look into the conduct and drawings from the directors etc.
2. Overdrawn Directors Loans are ASSETS and the liquidator has a duty to call these in and pursue on behalf of creditors.
3. DIVIDENDS may be classed as illegal if insufficient reserves were not there at the time, again these will be chased to pay back from the director.
4. Payments made to creditors in the lead up to insolvency will be looked at to see if any were classed as preferential (i.e. the director decided to pay one creditor over another) – These can be pursued by the liquidator to pay back as they are deemed a preference payment.
5. Make sure you do your research on the Insolvency Practitioner you engage OR go through an independent FREE company that has a panel of verified and trusted Insolvency Practitioners, so they can hold your hand through the process.Request a Call
If you are considering a Creditors Voluntary Liquidation for your insolvent company, there are important factors to keep in mind.
The advantage of a voluntary liquidation is that the directors have some control over who they engage and the timings for the process to be as smooth as possible.
However, it's crucial for the Director to understand all aspects of the process, costs and any personal implications before proceeding with the process to decide if this is the correct route, as once in liquidation it is irreversible.
At The Directors Helpline, we specialise in helping directors navigate the complexities of Liquidation. Our team of experts can assess your unique situation, provide comprehensive advice, and guide you through every step of the process. We offer our services completely free and confidentially, ensuring you have the support and information you need to make the best decision for your company.Speak to the Team
In a Creditors Voluntary Liquidation, directors have specific responsibilities to fulfil to ensure a smooth and compliant process:
1. Cooperation with the Insolvency Practitioner: Directors must provide all necessary information and cooperate with the appointed Insolvency Practitioner throughout the liquidation process.
2. Preparation of the Statement of Affairs: Directors are responsible for compiling a comprehensive and accurate Statement of Affairs, which outlines the company's financial position and assets.
3. Reporting on the director's conduct: The Insolvency Practitioner will investigate the director's conduct leading up to the liquidation and report on any misconduct or potential wrongdoing.
4. Assistance in asset realisation: Directors may need to assist the Insolvency Practitioner in the realization of the company's assets, providing necessary information and facilitating the process.
Facing insolvency as a company director is a challenging situation that requires careful consideration and understanding of all available options. At The Directors Helpline, we are here to support you in making an informed decision that best suits the needs of your insolvent company.
Our dedicated team of experts specialises in helping directors navigate the complexities of insolvency, including the Creditors Voluntary Liquidation process. Unlike Insolvency Practitioners (IP), we offer a free and confidential service, providing one-to-one guidance. Should a CVL be the most suitable option, we will introduce you to a trusted, fully licensed IP and we’ll assist you throughout the entire process.
Contact The Directors Helpline today to discover how our expertise and support can help you find the best way forward for your company.Get in touch
How The Directors Helpline Can Help
Expert advice: Our experienced team will assess your company's situation and provide personalised advice tailored to your specific needs.
Comprehensive understanding: We will help you fully comprehend the implications and options available, ensuring you make an informed decision.
Guidance throughout the process: Our experts will be with you every step of the way, providing ongoing support and assistance.
Free and confidential service: Our services are completely free and confidential, giving you peace of mind during this challenging time.
Not the insolvency practitioner: Our guidance is impartial and independent, meaning we will present you with the best solution, not just insolvency and liquidation.