What is Creditors Voluntary Liquidation (CVL)?
A Creditors Voluntary Liquidation is usually the last option for a company. To choose this form of insolvency would mean that your company is Insolvent and can not continue to trade. A CVL is the most common way for directors and shareholders to deal voluntarily with their company’s insolvency. You appoint your own choice of Insolvency Practitioner with your creditors’ approval. A CVL is under the effective control of creditors who can appoint a Liquidator of their choice.
What do I have to do?
Once you have decided that a CVL is the best course of action, immediate steps must be taken to prevent the situation worsening for your creditors – no further payments to creditors must be made, and any goods or services ordered before making the decision was made must not be accepted. The company will cease to trade once resolutions have been passed to place the company into CVL. You must provide the Liquidator with information about assets and liabilities. All creditor, employee and bank details must be given to the Liquidator together with any other information required. You and your fellow directors must attend a creditors’ meeting, called an S98 meeting, in which the company is formally placed into Liquidation. A report will also be presented that details the history of the company, its financial circumstances and why it has gone into Liquidation. Creditors can ask the directors questions and vote for the appointment of the Liquidator.
How will Armstrong Watson help?
As Liquidator we will:
- Advertise the liquidation in the London or Edinburgh Gazette and any other relevant paper if required
- Call a meeting of members and a meeting of creditors (S98)
- Write to all creditors and members to inform them of the proposed Liquidation and the date of the meetings
- Change the registered office to the Armstrong Watson address
- Help with preparation of a report and statement of affairs to be presented at the S98 meeting
- Deal with all creditors’ queries and correspondence
- Deal with all employees and their potential claims
- Deal with any company pension scheme
- Value all assets and freeze bank accounts
- Realise all assets
- Agree creditors’ claims and distribute any funds
- Deal with all statutory paperwork
- Reports to creditors
- Call annual and final meetings
How long does a CVL take?
Once the notices are signed, there is a minimum of 16 days notice to members before the S98 meeting. After this meeting, the company is formally in Liquidation and the powers of the directors come to an end. The Liquidation lasts as long as it takes for the assets of the company to be realised and distribution made to creditors. This is usually anticipated to take up to 12 months.
How much will a CVL cost?
The Liquidator is remunerated on a time-cost basis. Asset realisations and cash in the bank will fund the cost of the Liquidation and any excess money will be divided between creditors. If the company has insufficient assets to cover the associated costs, the Liquidator may require you and your fellow directors to pay the costs personally. The level of these will be agreed in advance.