A Creditors Voluntary Liquidation (CVL), is a form of liquidation that is instigated by the directors of a company. A CVL allows directors to recommend to the shareholders to voluntarily liquidate a company that can’t pay its outstanding debts.
To give you a better understanding of how you can place your company into a CVL, below is a 6-step guide to placing a company into CVL:
STEP 1 – Contact an Insolvency Practitioner
If your Company is in financial difficulties, you should contact a Licensed Insolvency Practitioner (“IP”).
We will conduct a confidential initial meeting for free and at a time convenient for you.
STEP 2 – Initial Meeting & Information Gathering
We will discuss the financial position of your company and explore all available options.
If a CVL is the best option based on the initial information provided we will agree a timetable for implementation.
At this stage a formal engagement letter and questionnaire will be issued to the company. Once the engagement letter and questionnaire are received an analysis of the information will be conducted.
STEP 3 – Board Meeting
Having discussed the financial position of the company, the directors resolve to place the company into CVL. The company usually ceases to trade. By this stage a Statement of Affairs and an explanatory report on the position of the company has normally been drafted for director’s approval.
A date for a meeting of shareholders is fixed, notice of this meeting is required, depending on the company, notice could be between 14 and 28 days in most cases we deal with, this notice period is reduced by shareholder agreement.
A date for deemed consent or a virtual meeting of creditors is set that is in line with the shareholders meeting. Creditors must be provided at least 3 business days’ notice for either a deemed consent or virtual meeting process, but once you have considered postage days, a minimum of 5 business days’ notice should be provided.
STEP 4 – Hiatus Period
We deal with the company employees, other creditors and help the directors to protect the company assets. Statutory notices are circulated for the shareholders meeting and the creditors deemed consent or virtual meeting procedure.
STEP 5 – Shareholders Meeting
Shareholders discuss the financial position of the company.
Shareholders usually resolve that the company should be wound up and to appoint the board of directors nominated IP as liquidator.
The company is now in liquidation.
STEP 6 – Creditors Ratify the Liquidators Appointment
At a virtual meeting of creditors held immediately after the shareholders meeting, the creditors would normally ratify the appointment of the Liquidator.
If the deemed consent procedure is used, the appointment of a liquidator will usually be ratified by 23.59 hours on the date of the shareholders meeting.
Should you or your clients require any free, confidential and regulated advice in relation to a CVL please do not hesitate to contact us via your usual point of contact or via 01270 212 700 or info@mgjl.wpenginepowered.com
Please remember the sooner advice is sought the more options there are available to avoid company insolvency, early action is the key.
All information is intended solely for informational purposes and should not be used as a substitute for specific professional advice.
