Creditors’ Voluntary Liquidation (CVL)
What is a CVL?
It is a formal process which is initiated by the directors/shareholders of an insolvent company, voluntarily choosing to bring the business to an end and wind the company up. This is usually when the directors believe the company is unable to pay its debts when they fall due.
What happens during a CVL?
A CVL will be handled from beginning to end by the appointed insolvency practitioner. A CVL will bring the company to a close and deals with all the outstanding company debts as a part of the process. While asset realisation will be maximised for the benefit of the creditors, there is likely to be a significant shortfall to creditors. However, any company debts which remain at this point will be written off upon the appointment of a liquidator, unless these have been secured by a personal guarantee, the responsibility of which would fall on the individual guarantor for payment thereof.
Why choose a CVL?
Once a company is insolvent, the directors owe a duty of care to the company’s creditors to take the necessary steps to minimise the losses the creditors may suffer. This means the directors may not engage in any activities that may worsen the position of the creditors or increase their losses any further. A breach of this duty may have significant consequences for directors.
If you are ready to close your business through a CVL and would like to speak to a member of our team, please contact Paul Davis (Head of Corporate Recovery and Insolvency) for an initial free consultation.