About Creditors Voluntary Liquidation (CVL)

A CVL is a legal procedure for closing an insolvent company where there is no prospect of preserving all or part of the business.

What is a CVL?

A CVL is a legal procedure for closing an insolvent company where there is no prospect of preserving all or part of the business.

A Licensed Insolvency Practitioner (IP) is appointed as liquidator and is responsible for closing the company, realising its assets (typically selling vehicles, stock and equipment and collecting debtors) and distributing available funds to creditors.

Because this is an insolvency procedure, the value of the company’s asset will be less than is owed to creditors, so creditors will not be repaid in full. Very often they will only receive a small proportion of the money they are owed, perhaps nothing at all.

Peter is highly regarded for his considered and proactive approach to the needs of stakeholders.

Peter Hart

Director - London

t: 0207 516 2221

e: peter.hart@pkfgm.co.uk

What’s the process for a CVL?

A CVL is initiated by the directors of the company. They will hold a board meeting where an IP is appointed to assist them with the formalities for placing the company into liquidation.

The first of these formalities is a shareholders’ meeting, which usually takes place within one or two weeks of the initial board meeting. At this meeting the liquidation formally begins and a liquidator is appointed.

The second technical step involves giving creditors the opportunity either to ratify or replace the liquidator chosen by the shareholders. This part of the process can be done in several different ways, but it is typically done by a virtual meeting (a conference or video call), which takes place shortly after the shareholders meeting.

This gives creditors the opportunity to ask questions about events leading up to the liquidation and, if they wish, to replace the liquidator appointed by the shareholders with a different liquidator. The creditors meeting may also be asked to approve an estimate of the liquidator’s fees.

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What does the Liquidator do?

A liquidator has to act in the best interests of all creditors. His main roles are to sell the company’s assets (using specialist professionals where necessary), collect monies owed to the company (typically book debts) and distribute the funds generated from this process to the creditors according to the legal order of priority.

In addition the liquidator has a duty to investigate the affairs of the company in the period before the liquidation. He has certain powers which enable him to reverse transactions which took place prior to the liquidation which may not have been in the best interests of the creditors (such as assets being transferred to other parties for less than they are worth) or take action against directors if they have acted improperly. A liquidator must also report any inappropriate conduct by directors to the Insolvency Service (a government department).

The liquidator must report to creditors on an annual basis to inform them of the progress of the liquidation and update them on the likely outcome.

When the liquidator has fulfilled all his duties the CVL is concluded and the company is dissolved.

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