Creditors’ Voluntary Liquidation (CVL)

If you are considering closing a limited company with debts, then a Creditors’ Voluntary Liquidation (also known as a CVL) is likely the best course of action.

A CVL could be the best solution if you don’t want to keep your business running due to cash flow problems or pressure from creditors.

Suppose you fear your limited company is failing due to debts becoming unmanageable. In that case, liquidation may be a way of restarting your business, clearing any outstanding debts, getting rid of a poor reputation, and easing unhealthy relationships with creditors.

We understand how it can feel for a company director faced with mounting debts and the feeling. But, unfortunately, there is no way out. However, there is the potential for a positive future too.

Liquidating a company is not to be taken lightly, so it’s essential to understand the different types of liquidation, the overall process, and how you can get started.

Our team has years of expertise in dealing with liquidation and can make a difficult process as stress-free as possible while securing the best possible financial outcome.

The Future Strategy Liquidation Process Minimises Worry

We will:

• Appoint an experienced Insolvency Practitioner (IP) to work on your case.
• Explain the process thoroughly, keep you adequately informed, and be easily accessible.
• Leave you a clean slate to start again – with unsecured debt wiped away with the company’s liquidation.

If you would like to know more about the possibility of liquidating your company, please get in touch with the Future Strategy team today for a free and confidential initial consultation.

We will assess the viability of the business and offer advice on appropriate strategies.

We will also advise on the solution options available concerning your specific situation and requirements. These solutions are wide-ranging, cost-effective, and flexible.

Why Choose a Creditors’ Voluntary Liquidation?

Sometimes, a business will be beyond rescue, and liquidation is the best and perhaps the only way forward. This allows the directors to move on and creditors to recover as much money as possible.

A CVL effectively closes the company and deals with all debts.

The idea of liquidation probably feels like a big step. After all, you’ve worked hard to get your business up and running, and now you’re looking to close it.

If you’re thinking about liquidating your business, these are the reasons why it could be right for you:

• When your business is long-term insolvent (i.e., it can’t pay its debts).
• When you have no realistic way to repay creditors.
• When you’re looking to start another company debt-free as part of a recovery procedure.

Often our clients worry about the implications of liquidation and its impact on future ventures. In fact, the opposite is true – liquidation often marks the start of something new rather than an end:

• You’re able to start again with a clean slate.
• It doesn’t mean you have to give up on business. Indeed, for many directors, it can be the start of something new and exciting.
• You aren’t liable for any unsecured debt; even tax debts owed solely by the company die with it.
• You’re usually able to buy the company’s assets out of liquidation.

Advantages of a CVL

The most common reason why most directors choose to liquidate the company is to avoid the hassle of being accused of wrongful trading. In addition, liquidating a company shows directors are acting in the best interests of the company’s creditors. 

Taking the initiative to wind up your company through a CVL (sometimes known as a voluntary creditors liquidation) voluntarily will also save you the complication of having to deal with the process of being forced to liquidate because of a court petition.

But perhaps the most significant advantage is peace of mind. Voluntarily liquidating your company will assure you that the troublesome business is finished, leaving you to concentrate on the future.

When we liquidate your company, you no longer have to deal with pressure from creditors the business owes, debt collectors, and HMRC. You can essentially start again with a clean slate.

When to Consider a Creditors’ Voluntary Liquidation

One of the first factors to consider when thinking about voluntary creditors liquidation is if your company is insolvent or not. The fundamental question is: “can I pay the bills when they are due?.”

If the answer is ‘yes,’ then you aren’t insolvent. However, if you still want to look at closing your company, you’ll need a solvent liquidation (Members Voluntary Liquidation or MVL) or dissolution.

If the answer is ‘no,’ then your business could be considered insolvent, which means your responsibilities as a director change.

You should also consider if your cash flow problem is long-term. If it’s just temporary, liquidation may not be the best solution. Instead, a Company Voluntary Arrangement (CVA) or an informal agreement with your creditors would probably be a better solution.

The Future Strategy team can help you decide which options are best for you with our free initial consultation – simply request a quote to find out more.

What Does a Creditors’ Voluntary Liquidation Process Involve?

If you are considering taking this route, there are several restrictions you need to consider.

A CVL could be the only course of action if a company doesn’t have enough money to pay its debts. It is one of the most common ways for directors and shareholders to deal voluntarily with insolvency.

A CVL is typically started by directors, who agree to convene meetings of shareholders and creditors and discuss placing the company into liquidation.

Once this course of action has been agreed upon, we can help deal with the CVL.

Notably, a liquidation can only be carried out by a licensed Insolvency Practitioner (Liquidator).

At Future Strategy, we provide a fully qualified Liquidator to oversee the entire process and identify potential problems early, resolving them as soon as possible.

Once appointed, the Insolvency Practitioner (IP) has three main objectives:

• First, to realise the assets of the company.
• Second, to agree on claims of creditors of the company.
• Third, to investigate the affairs of the company and the directors’ conduct.

A CVL is appropriate when the company is deemed insolvent and when it does not appear viable, even after restructuring.

How Much is a Limited Company Liquidation?

A liquidation usually costs between £2,500 and £5,000 (plus VAT), and disbursements, though the director will pay nothing in many cases.

Liquidating a company is funded by the sale of any assets, though administrative dissolution may be a better option if there are no assets.

If liquidation is necessary, it may even be funded by a redundancy claim.

If you meet the criteria, claims can be made from the National Insurance Fund via the Redundancy Payments Service (RPS), and any redundancy payments are tax-free. If you can make a claim, our experts are on hand to help.

Can You Make a Claim for Directors’ Redundancy?

If you are a director of a limited company that’s been trading for more than two years and you’re considering closing it down due to financial struggles.

(HMRC debts, creditor pressure, cash flow worries, potential insolvency, etc.) using a creditors’ voluntary liquidation. You can likely claim a director redundancy payment.

The average claim in the UK is £12,000. This money can be used for liquidation costs if necessary.

You can also likely claim for other statutory entitlements such as notice pay, holiday pay, and unpaid wages.

If you meet the criteria, claims can be made from the National Insurance Fund via the Redundancy Payments Service (RPS), and any redundancy payments are tax-free. If you can make a claim, our experts are on hand to help.

What Happens After the CVL Liquidation Process is Done?

The company is struck off the register held at Companies House and no longer exists. Any liabilities still unpaid will be written off unless they were personally guaranteed.

(You might also find this page about compulsory liquidations useful).