Creditors Voluntary Liquidation

Creditors Voluntary Liquidation

Our experts have plenty of experience when it comes to Creditors Voluntary Liquidation and we can offer you plenty of advice and information.

Voluntary Liquidation Costs

Voluntary Liquidation Costs

The cost of liquidation can be expensive. This is why it is important to explore your options prior. Our team can help you decide whether liquidation is the right choice for you. To find out more, please fill in our contact form.

CVL Liquidation

CVL Liquidation

If you would like details on CVL liquidation your best option would be to speak with one of our experts. Complete the contact form now for more information.

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If you are interested in finding out more about creditors voluntary liquidation and the benefits of this, you've come to the right place.

What happens when your business has amassed so much debt that it can no longer trade and the only option left is to close it? Can closing a company possibly have advantages? How much will it cost to go down this route? Is it the only liquidation option available to you?

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You may have thought about administration or CVA's https://www.businessdebts.org.uk/administration-cva/ although this may not be the best option for you.

The following article looks at answering these questions and will leave you with a better understanding of what a CVL order would mean for your company.  

What is Creditors Voluntary Liquidation?

Let’s begin with the obvious question, ‘What is creditors voluntary liquidation?.’ CVL is when a business has crippling debts that they cannot afford to pay back and a decision needs to be made about what happens next.

The Director of the company would chair a meeting with its shareholders and put the idea forward of approving a CVL. This would mean that the business would go into liquidation and be closed down. Its assets would be sold, and anything raised from these sales would go towards paying the debts off.

If there is any money left after the debts had been paid then it would be split amongst the shareholders.

In order for a CVL to be approved, 75% of the shareholders must agree to the ‘winding up resolution’ https://www.businessdebts.org.uk/winding-up/ for it to be approved by the Courts.

Once the shareholders have agreed, you must find an Insolvency Practitioner and send your CVL resolution to the Companies House in under 15 days. You must also advertise it in the London Gazette within 2 weeks.

Liquidation of Company

The liquidation of a company has the power to not only affect the business itself but that of the local community and surrounding areas too. The CVL of a company can sometimes have a knock-on effect to businesses nearby as consumers panic and lose faith that the epidemic might spread to other businesses in that area.

Of course, the two are unrelated but that doesn’t stop consumers from being wary about where they choose to purchase from.

Voluntary Liquidation Costs

One of the big disadvantages of this action is that the voluntary liquidation costs can be expensive. If the business is struggling for money as it is then you’ll need to think long and hard about the associated costs that go with applying for a CVL.

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The fees for submitting the petition and paying the Insolvency Practitioner come to roughly £1,900, although this can vary substantially. This figure will come out of the sales of your assets. This obviously means that there is less money in the pot to pay your creditors back with.

Types of Liquidation

There are three different types of liquidation available to faltering companies;

  1. CVL (creditors) - where the shareholders vote to liquidate the business and sell the assets to pay the debts off.
  2. Compulsory liquidation - when the company is unable to pay its debts so applies to the Courts to liquidate it.
  3. MVL (members)  - when the company has more debts than it can afford to pay back but you want to close it down regardless.

CVL Advantages and Disadvantages

As surprising as it may sound, there are some positive things to be taken from a CVL. The CVL advantages and disadvantages include;

Advantages

  • You as the Director can manage the timescale of the process and allow the company more time to prepare for the CVL. You would not be able to do this with compulsory liquidation.
  • Linked into this, this gives the Director a step-by-step process to follow, allowing them to know what happens at each stage.
  • Once a liquidator is appointed the creditors have to deal with them, not you, giving you some breathing space to sort out other issues. The creditors are also dealt with on a priority basis, so this brings a degree of order to the situation.
  • If a company is owed more than £750, it cannot file for legal action to be taken against it while it is under the protection of a CVL.

Disadvantages

  • The organisation will be closed and all its assets will be sold off to pay for the business debts.
  • The CVL has to be advertised in the London Gazette, so it’s a very public affair. The company will not be allowed to close quietly.
  • The conduct of the Directors will be investigated to see if they were personally responsible for the collapse of the business. If they are found guilty then they can be banned from being named Director of any other businesses for up to 15 years.
  • If there is any money leftover after the debts have been settled then this will be distributed amongst the shareholders. Unfortunately, this rarely happens as there is never usually anything left to distribute.

Members Voluntary Liquidation Process

The MVL process is as follows;

  1. The Board of Directors meets
  2. A ‘Declaration of Solvency’ is signed
  3. A Shareholders meeting is arranged where a vote is taken about whether to liquidate the company or not
  4. The formalities of hiring an IP and informing the Companies House begins
  5. The Deed of Indemnity is signed
  6. The Liquidator will close the case once all debts have been satisfied

CVL Liquidation

If every other avenue has been explored and no solution can be found then a CVL order might be the only remaining option. This is not an easy decision to make, but it can be a practical exercise in damage limitation and ensuring that some good can come from the closure of the business.

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If you would like help from our team https://www.businessdebts.org.uk/, please do get in touch.

Get in Touch

If you are looking for help with Creditors Voluntary Liquidation near me then get in touch. We understand that this may be the closest thing to some form of order that your business that you can offer before it closes for good.

We will work with you with a respectful understanding of the situation, but also try to make it as painless as possible for you. Call now for expert advice and assistance on this delicate matter.