Creditors’ Voluntary Liquidation (CVL)
If your company is insolvent and cannot pay its debts, a Creditors’ Voluntary Liquidation (CVL) is a formal process that allows directors to close down the business.
At the Liquidation Centre, we help directors through every stage of the CVL process, from the first conversation through to the company being dissolved and removed from the Companies House Register.
Creditors’ Voluntary Liquidation services
If a company is struggling financially, a CVL can be started by the company’s directors and shareholders. This voluntary process gives the directors more options, rather than leaving them at risk of being forced into a compulsory liquidation by a creditor like HMRC or a key supplier.
As a director of an insolvent company, you must seek professional advice on your options to reduce any ongoing exposure to all stakeholders.
If you are not sure whether a CVL is the right option, we can review your situation and explain the alternatives. We only recommend a CVL if it is right for your specific circumstances.
Is Creditors’ Voluntary Liquidation right for my company?
A CVL is likely to be the right option if your company is insolvent and there is no realistic prospect of turning things around, A company is technically insolvent if it cannot pay its debts as they fall due, or if its liabilities exceed its assets. If either of those applies to your company, you have a legal obligation as a director to speak to an insolvency practitioner and take action.
If one of more of the following apply to your company, a CVL could be the right route:
- You have more liabilities than assets
- You cannot pay your debts as they fall due
- You are trading at a loss
- You have stopped trading with liabilities you cannot settle
- Your company is no longer viable
If the business still has a viable future, alternatives such as a Company Voluntary Arrangement or administration may be worth considering first. The Liquidation Centre can review your circumstances and provide professional guidance on which route is right for your situation.
Our Creditors’ Voluntary Liquidation Process
At the Liquidation Centre, we guide directors through every stage of the CVL process until the company is dissolved, keeping you informed throughout.
What is our Creditors’ Voluntary Liquidation procedure?
A CVL follows a series of formal stages, below is an overview of the CVL process:
Stage 1 – Directors hold a board meeting:
The Directors must instruct a licensed insolvency practitioner to confirm that a CVL is the right process and they’ll help you with the necessary paperwork. A board meeting is then held to place the company into CVL and nominate their choice of liquidator. The board also arranges a meeting of the company’s members so they can approve the resolutions to wind up the company.
Stage 2 – Notices sent to creditors and members:
Notice of the proposed liquidation is sent to creditors and members. The creditors are provided with three business days’ notice regarding the decision on the appointment of the liquidator.
Stage 3 – Creditors provided with Statement of affairs:
Creditors receive a report detailing events leading up to the board meeting and a statement of affairs showing the company’s current financial position. The nominated liquidator assists the directors in preparing these documents.
Stage 4 – Members’ meeting is held:
At the members’ meeting, shareholders are asked to pass a resolution placing the company into liquidation and to appoint a liquidator.
Stage 5 – Creditors confirm the liquidator’s appointment:
Deemed consent is sought from creditors to confirm the liquidator’s appointment. If creditors raise no objections to the members’ choice of liquidator, the appointment is confirmed. Creditors may request a physical meeting if they want to consider appointing an alternative liquidator, though this is governed by statutory rules.Once appointed, the liquidator takes over all communications with creditors, HMRC, and Companies House. They deal with the company’s assets and liabilities, carry out the required investigation into the company’s affairs, and manage the process through to dissolution.
Creditors’ Voluntary Liquidation Cost
The cost of a CVL depends on how many creditors the company has, if there are assets to sell, whether there is a business to sell as a going concern, and how complex or straightforward the closure will be.
A straightforward CVL with the Liquidation Centre typically starts from around £3,000 plus VAT. In most cases, the liquidator’s fees are paid from the company’s assets, so directors do not need to fund the process themselves.
We will always give you a clear breakdown of costs before you make any decisions.
Contact us for a free, no-obligation quote, and we can confirm the cost of your CVL based on your specific circumstances.
How long does Creditors’ Voluntary Liquidation take?
Most CVLs take around six to twelve months to complete, though this depends on the complexity of the case. Cases with significant assets to sell, creditor disputes, or ongoing investigations into director conduct will take longer. Simpler cases with fewer assets and straightforward creditor positions tend to move through the process more quickly.
The main factors that affect the timeline include:
- How many creditors there are
- Whether there are assets to realise
- How long it takes to resolve outstanding creditor claims
- Whether there are any matters requiring further investigation
Creditors’ Voluntary Liquidation HMRC
HMRC is one of the most common creditors in a CVL, and many companies that come to us are dealing with unpaid VAT, PAYE, or Corporation Tax that has built up over time.
When a company enters a CVL with HMRC as a creditor, HMRC debt is communicated with in the same way as other unsecured creditors and dealt with as part of the formal process. Once we are appointed as liquidator, we take over all communication with HMRC on your behalf, meaning directors no longer have to deal with them directly.
Although it may feel like the right thing to do when you’re under pressure, directors should not make preferential payments to HMRC or any other individual creditor ahead of others in the period leading up to the liquidation, as this can be challenged by the liquidator. You are also required to cooperate fully with the liquidator’s investigation, which will include a review of how any HMRC debts happened and how the company’s finances were managed.
If HMRC has already threatened or issued a winding-up petition against your company, then getting advice from an insolvency practitioner should be a priority. Your company could be at risk of having the bank accounts frozen and may face compulsory liquidation. Acting quickly and putting the company into CVL before the courts get involved can give you more options and a better outcome for creditors.
Creditors’ Voluntary Liquidation advantages and disadvantages
A CVL is not the right solution for every company, and like every formal process, there are advantages and disadvantages, which will need to be discussed with your chosen liquidator.
Some of the advantages of a CVL include:
- You take control of the process rather than waiting for a creditor to force compulsory liquidation through the courts.
- Creditor pressure stops, as once we are appointed, we handle all communications with creditors on your behalf.
- Unsecured debts that cannot be covered by the company’s assets are written off when the company is dissolved.
- It demonstrates to the Insolvency Service that you acted responsibly when you knew the company was insolvent, which reduces the risk of personal consequences.
- Employees, including directors who were on the payroll, can make claims for redundancy pay and other entitlements through the government’s Redundancy Payments Service.
- The company will be closed permanently as a CVL is not a rescue procedure.
- The liquidator will investigate director conduct in the period before the liquidation. If there is evidence of wrongful trading or misconduct, directors can face personal liability or disqualification.
- What is raised from the company’s assets may not be enough to cover what is owed to creditors, creditors will often not be paid in full.
- Directors who provided personal guarantees on company debts remain liable for those debts after the company is closed.
- Certain company transactions pre liquidation can be challenged and potentially overturned.
What happens to directors when a company goes into liquidation?
When a company enters a CVL, the role of a director during an insolvent liquidation changes very quickly. Although directors are involved in the process, they hand over control to the liquidator, and they must prioritise the interests of creditors moving forward.
Throughout the liquidation, directors are required to cooperate fully with the liquidator, doing so will help to avoid the risk of personal liability. IP’s will ask directors to provide them with accurate financial information about the company, and to complete a statement of affairs.
The liquidator is legally required to investigate the company’s financial history and how it was run in the period leading up to the liquidation. A report is then submitted on your conduct to the Insolvency Service, which is a standard part of every CVL.
In most cases, where directors have acted properly and sought advice quickly, they are free to move on once their obligations have been met. However, in some cases, if directors are found to have traded wrongfully or fraudulently while insolvent, the following actions can be taken against directors:
- Disqualification from acting as a director for a set period of time
- A compensation order making you personally liable for certain company debts
- HMRC pursuing you personally in certain circumstances
- Transactions made before the liquidation being challenged and potentially overturned
The sooner you seek advice, the better your prospects of avoiding these outcomes. The liquidator’s report to the Insolvency Service will take into account how quickly you sought professional advice once you knew the company was insolvent.
Why choose the Liquidation Centre for Creditors’ Voluntary Liquidation?
The Liquidation Centre is one of the UK’s leading company liquidation providers, part of the Exigen Group, and a three-time winner of the ‘Best Liquidation Provider’ at The Contracting Awards.
We have been handling CVLs for directors across the UK for over 25 years, and we are the preferred licensed insolvency practitioners for many of the UK’s top contractor accountants, as well as a signifiant numbers of chartered accountancy firms across the country.
When you work with us, you get:
- A free, confidential initial consultation with no obligation
- A clear, honest explanation of your options before you commit to anything
- Straightforward pricing with no hidden costs
- A team that handles all creditor, HMRC, and Companies House communications on your behalf
- An experienced, award-winning team that deals with CVLs every day
We will guide you through your options and only recommend a CVL if it is right for your company.
How the Liquidation Centre can help with Creditors’ Voluntary Liquidation in the UK
If your company is solvent, delaying the decision to start a CVL could make your situation worse and potentially lead to personal liability. We support directors across the UK by managing the entire process, from speaking with creditors to filing all the necessary paperwork.
We understand that getting to this point is not easy, but whether you’ve already looked into your options or you need clear and quick advice about creditor pressure, call us today to a free, confidential consultation.