Creditors’ Voluntary Liquidation (CVL) is a process instigated by proactive and responsible directors of an insolvent company where it is clear that there is no reasonable prospect of a recovery of their company’s financial position. It involves a structured cessation of trading to avoid a worsening of the position and the appointment of an independent licenced insolvency practitioner to act as liquidator of the company.
It is the liquidators’ duty to realise the company’s assets on behalf of creditors and to consider the actions of those who were directors of the company in the period leading to liquidation to ensure that they were reasonable.
We can advise whether a CVL is indeed the right solution and if so, provide dedicated support to the directors in placing their company into CVL so that a line can be drawn under the difficult circumstances experienced by all involved.
Key to the CVL process is an opportunity for directors to engage with creditors in an open and honest way to demonstrate that they have acted responsibly throughout. Once in liquidation, directors can focus their energy and attention more positively on the future, which quite often involves starting again in a new successor company.
CVL is more favourable to compulsory liquidation, whereby a company is forced into liquidation via a Court application, usually made by a creditor, when directors fail to act to take control. If you would like to learn more about the advantages of CVL over compulsory liquidation, please read our blog.