- CVL is the most commonly used Company Insolvency process in the UK
- This Liquidation gives directors, should they wish, the opportunity to purchase the business assets and goodwill and then re-open the business within another Company
- A Director lead process and therefore can only be initiated by the Directors of the Company
A Company is considered Insolvent if it can no longer afford to pay its debts as and when they fall due, or if its liabilities exceed its assets. When a Company reaches this position it can be an extremely worrying time for you as a Director. The mounting pressure from Creditors can leave you wondering where to turn for help but you do have options and a CVL may be the solution!
What is a Creditors’ Voluntary Liquidation?
A Creditors’ Voluntary Liquidation (CVL) is a formal process which is used to effectively ‘close down’ an insolvent business. Its main purpose is to realise any Company assets and distribute the proceeds from a sale of those assets to the Company’s Creditors. If the Company has no assets, there will be no return to Creditors.
Please note: A CVL does not have to mean full closure for the underlying business. The company director will have the opportunity to purchase the company’s assets and re-open the business within another company. To find out more about this option please contact us now.
Insolvency Warning Signs
Insolvency rarely happens instantaneously. Symptoms can develop over time, but the important thing to remember is that the sooner advice is sought after any symptoms are seen the more chance the company has of being rescued.
Some of these symptoms can include:
- High monthly creditor payments that cannot be met
- Reducing Sales
- Loss of key customer and/or contract
- Unable to obtain further credit or increasing reliability on overdraft facilities
- Non-payment by your customers
- Creditor pressure
In order to foresee these causes early on, company directors need to ensure that their books and records are kept on top of as this will give them time to plan and react accordingly.
If it has however reached the point where these issues have affected the company and the business then it is important to seek some professional advice on what the next best step will be for your circumstance.
One of the next steps could be a CVL.
The CVL Process
Advice – The first step is to understand all of the options available to you.
Decision – Should you decide that a CVL is the right process for you and your Company you should instruct your chosen Licensed Insolvency Practitioner. At this stage we will become the point of contact for the Company’s creditors.
Board Meeting – A meeting of the board of Directors at which it is resolved that the Company is Insolvent and that they wish to proceed with a CVL process. The Directors also agree to convene a meeting of Shareholders and a Creditors Decision Procedure in order to resolve to formally place the Company into Liquidation and appoint a Liquidator.
Notice – Appropriate notice is issued to convene a meeting of Members and a Creditors Decision Procedure.
Statement of Affairs – The Director will be required to prepare a Statement of Affairs on behalf of the Company. This is essentially a Statement detailing the Company’s assets and liabilities. We will assist with the preparation of this document.
Meeting of Shareholders – A general meeting of the Company will be held at which members will pass a resolution to formally place the Company into Liquidation and appoint a Liquidator.
Decision by the Creditors – There is no longer a requirement to hold a physical meeting of Creditors unless creditors have requested one. Creditors’ decision will be obtained by way of either Deemed Consent or Virtual Meeting.
Statutory Paperwork – We will file the statutory paperwork confirming the Liquidation at Companies House.
Appointment – Once appointed by members and then creditors, the Liquidator has three main duties;.
To realise the Company’s assets
To agree the claims of the Company’s creditors and make payment to Creditors where possible
To investigate the Company’s affairs and the Director’s conduct
How can FA Simms help?
With over Forty years’ experience we pride ourselves on giving free, professional and confidential advice. We will assess the Company’s situation and help you to understand all of the options available to you. Our fees are extremely competitive and we will help you at every step of the process!