A Creditors Voluntary Liquidation is where a business can no longer be made profitable or the owner does not wish to continue trading.
Directors (partners in an LLP) must choose a licensed insolvency practitioner to assist them with the winding up of the company or LLP. It means the business will cease trading, the assets are sold, staff made redundant and creditors notified. It is often shortened and called a CVL.
Why Would I Need A Creditors Voluntary Liquidation?
When a business owes more than it owns or is unable to pay its debts as they fall due then for legal purposes it is insolvent. In this situation, the directors need to take professional advice from an accountant or solicitor who often refers them to a licensed insolvency practitioner, such as Kirks.
The CVL Procedure
The process of making a Creditors Voluntary Liquidation happen is usually controlled by the licensed insolvency practitioner chosen by the directors. The insolvency practitioner will usually help with the CVL process and the following is a summary of what happens in the two weeks up to the date of liquidation:
- All the business staff are laid off and the business premises closed
- The insolvency practitioner prepares all the legal paperwork for the directors, letters are sent to all the shareholders notifying them of a proposed meeting to pass a resolution making the company go into liquidation
- Letters are sent to all creditors notifying them of a meeting to consider the resolution to put the company into liquidation and choose the liquidator, as well as how they will get paid
- The company goes into liquidation during the meetings
What happens after the company goes into liquidation?
After the shareholders and creditors meetings the liquidator takes control. Their objective is to:
- Realise the assets which usually means selling plant, machinery and vehicles at auction
- Collect in any book debts
- Close bank accounts
- Investigate what happened
- Ask the directors to fill in questionnaires to help with that investigation
- File a report to the Department for Business Innovation & Skills within six months on the director’s conduct
- Write to creditors and agree their claims
- The liquidator will try and pay a return from the assets to creditors. This is called a dividend
- Finally, they will close the case when all matters have been dealt with
How long does a Creditors’ Voluntary Liquidation Last?
A normal CVL will last about one year, but more complex cases can stay open indefinitely. In particular a case may be kept open to deal with ongoing litigation.
Creditors Voluntary Liquidation is where a business can no longer be made profitable or the owner does not wish to continue trading.
A Word of Advice
Make sure when choosing a suitably qualified and experienced liquidator that he or she is a properly “Licensed Insolvency Practitioner”. There are a number of firms advertising themselves as “licensed” but all they have is a consumer credit licence. Their objective can sometimes be to just charge you a fee and pass you onto someone else.
As experienced licensed insolvency practitioners we can help your business through a Creditors Voluntary Liquidation. Contact us today for a free consultation.