A Creditors Voluntary Liquidation (“CVL”) is a formal insolvency procedure used to close down an insolvent company if its directors realise that its liabilities exceed its assets and/or it cannot pay its debts as and when they fall due and there is no prospect of the company’s position improving.
This process is a voluntary option for directors and agreed by it’s members and creditors. It brings an end to the burden of company debts, however it should not be confused with Compulsory Liquidation, which is the process where one or more of the company’s creditors issue a winding-up petition against the company, which if ignored effectively forces the company into Liquidation.
Company directors agree to enter the company into CVL however, it is the members that have to pass the relevant resolutions and the appointment of a liquidator is agreed by the creditors.
A company that decides to proceed with a CVL is usually struggling with cash flow making it difficult to pay its debts as and when they fall due and ultimately can make it impossible to continue trading, with increasing creditor pressure.
There is no limitation on being a Director of another Limited company even if you have been a Director of another company that has been placed into Liquidation, providing there have been no directors disqualification proceedings.
- A consultation is held either face to face or alternatively via a conference call with the Directors of the company and ourselves. This is to make sure that Liquidation is the correct procedure for the Directors and discuss all alternative options available.
- Once the decision to liquidate is made we will gather information about the company to prepare a report to its creditors and members on behalf of the directors.
- The company should cease trading once the decision has been made to liquidate. We can assist in making the employees redundant.
- We will provide information to any employees made redundant so that they can claim for any outstanding monies that are due to them including arrears of pay, holiday pay, notice pay and redundancy pay from the redundancy payments service (“RPS”). Directors can also make a claim for any of these monies that are owed. The RPS can take up to six weeks when making payments in relation to the employees claims from the date of Liquidation.
- Once a date for the members and creditors meetings have been scheduled, we will prepare all the required paperwork to liquidate including; board minutes, notice to members, notice to creditors and the advertisement in the London Gazette. Please note the directors are required to sign these forms.
- We will also prepare a report to creditors for the creditors meeting with the help of the directors.
- On the day of the members and creditors meetings, members pass a resolution to appoint a Liquidator. This is the day the company actually goes into Liquidation. This is usually followed by the creditors meeting. A director has to chair the meetings and it is usually done via a conference call. Bridgestones will assist with the conduct of the meetings.
Following appointment, the liquidator will write to and notify all the creditors and members that a liquidator has been appointed and ask them to submit their claims.
The appointment of a liquidator will be advertised in the London Gazette and we will also file the necessary documents at Companies House.
If the company has any physical assets such as plant and machinery or motor vehicles an independent agent can be instructed to assist in the valuation marketing and selling of the assets. We will also handle any retention of title claims.
The Liquidator will contact any company debtors to attempt to collect in any monies owed.
The Liquidator will investigate the affairs of the company and it is the Liquidators duty to collect the company’s books and records including online financial records and physical records.
The Liquidator will agree creditors claims when a dividend will be paid to creditors.
At the time when all matters are finalised and Liquidation can be closed, a final report will be sent to all creditors. Companies House will also be notified and the company will be dissolved three months later.
Compulsory Liquidation is enforced against a company as the result of a court order that follows a petition by a creditor, with an official receiver or insolvency practitioner appointed to wind up the company’s affairs. Voluntary Liquidation, as the name suggests, is a similar process, but one entered into voluntarily.