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What is Creditors' Voluntary Liquidation CVL
Creditors' voluntary liquidation is when the directors decide that their company should stop trading and its assets are "liquidated" and turned into cash. This is usually due to the company being insolvent and the directors do not want to be wound up compulsorily by the court.
When is it necessary for the directors of the company to think about creditors voluntary liquidation?
- The company has run out of cash
- Creditors are threatening a winding up petition or other legal action
- The company appears to not be viable
- The company cannot pay its debts on time
- The directors are concerned that the business may build up more debts.
- They are also worried about wrongful trading.
Creditors Voluntary Liquidation Process Step by Step
You will need to find a liquidator. We have a number of licensed insolvency practitioners at the firm. Uniquely to KSA Group, YOU can speak to one of our IP's TODAY, if you call now on 08009700539. It is not legally possible to liquidate your own limited company!
Pass details of any company assets over to the proposed liquidator, and our valuers may get these valued. This will independently set the value of the assets for going to auction, or you may wish to buy these back
Let us know who the company owes money to (creditors). KSA Group will write to them all to let them know what's happening and tell them that a creditors meeting will be held. The meeting can be held over the phone or online. This will quickly remove creditor pressure from YOU and they will start talking to KSA instead!
Give us all company information and books and records. KSA Group will give you a list of all the information we need in order to liquidate your company. This information will allow us to prepare the necessary reports for the creditors
The directors then ask us as licensed insolvency practitioners to seek a decision from the creditors and the shareholders as soon as possible (within 14-21 days) to put the company into liquidation with the liquidator appointed by the creditors. In most cases we will ask for "deemed consent" whereby a date is fixed no ealier than 7 days into the future and if no objections by creditors have been received then the company will be deemed to have been put into liquidation. The majority of liquidations (70%) are done this way now. However, in larger and more complex cases it is more likely that a creditors meeting is held.
These meetings are usually held virtually unless this is explicitly requested by at least the following
- 10% by value of creditors or
- 10% in total number of creditors or
- 10 individual creditors
Then a physical meeting can be held.
If you decide that voluntary liquidation can help you then you can end the worry. The process stops creditor pressure and worries, end those sleepless nights and ultimately help you get on with your life.
Additionally, if you would like to liquidate your company, call us on 0800 9700539 or you can fill out a form on our www.liquidatemycompany.com website and get a quote in minutes. We can talk you through the process, organise the legal paperwork and begin proceedings.
How Much Does Creditors' Voluntary Liquidation Cost?
The costs of the process very much depends on the complexities of the case and the likely time it will take the Insolvency Practitioner to carry out their duties and responsibilities. The main things to consider are;
- The number of creditors and how much is owed.
- How many employees there are
- Are there any book debts to collect
- How much investigation is needed into the company's affairs.
The costs of liquidation can put directors off but not doing anything is likely to cost you more in the long run! Generally the costs start at around £4000 + VAT. This would be for liquidating a company with a single creditor, such as having an unpaid Bounce Back Loan (BBL) or HMRC. For more than one creditor issue, we would expect the fee to be approximately £4,500 plus VAT. For more complex issues including companies who have landlords, employees, BBLs and supplier debts we will provide a written quote after our meeting with the directors to discuss the company’s options. Do get in touch to discuss your company’s liquidation, don’t delay and hope the problem will go away!
What if there are no assets to pay for the voluntary liquidation?
This is a common question and one that indicates the directors have failed to control the situation carefully. Look, if there are no assets to pay a modest fee for the liquidation I would ask, where has all the money and assets gone? Surely you as directors knew (or ought to have known) that the company was facing failure and you therefore should have ACTED SOONER?
Why then has the board of directors run the company into the ground to such an extent that there is not enough in the way of cash and assets to pay for this? REMEMBER as a failed limited company the assets DON'T BELONG TO YOU!
Therefore if you have had the benefit of the assets then it makes sense for the directors to pay for the liquidation process.
How Long Does the Process Take?
The appointment of a liquidator, which means that the powers of the directors cease, usually takes between one and two weeks.
It is possible, if 90% of the shareholders agree, to do a Creditors Voluntary Liquidation in seven days but this is rare. This is more likely to happen in the case of perishable assets such as fresh food.
However, the liquidators have to sell the assets etc, do investigations and file the necessary paperwork. This can take 1-2 years, if not longer. The bigger the liquidation, the longer it takes (usually).
Is It Possible To Reverse A Creditors Voluntary Liquidation?
If for some reason funds are found to pay back the creditors in full then it is possible to stop the process as long as assets of the company have not been actually liquidated i.e sold. However, this is extremely unlikely to happen. If there is money suddenly available at the eleventh hour then it might make more sense to allow the company to go into liquidation and buy back the assets at a fair value.
What happens after the CVL is completed?
When the all the assets are sold, creditors reported to, and any monies paid over from the liquidation the company is struck off the register and effectively ceases to exist. As the debts belong to the company the liability dies with the company. However, if directors have personally guaranteed the company liabilities then creditors will be able to claim on these. The liquidator will have investigated the conduct of the directors and assuming that there was nothing untoward then life carries on! Directors are able to start a new company although there are strict rules about reusing the same or similar company name. Learn more about this in our downloadable guide
For the second time since the impact of the coronavirus (COVID-19) pandemic, the monthly number of registered company insolvencies was higher than pre-pandemic levels. This was driven by the higher number of creditors’ voluntary liquidations (CVLs). 1,358 creditors voluntary liquidations (CVLs) which was 122% higher than that in January 2021 and 34% higher than in January 2020
Will Voluntary Liquidation Stop My Worries?
Voluntary Liquidation enables you to wrap up your company quickly and professionally. You can then become director of another company once the liquidation process is complete, but there are restrictions on the re-use of the company name. You will no longer be authorised to trade under an identical or similar name - it could lead you in court if you do so. It is worth noting, if as a director you have been compliant and on the payroll for many years, you can actually claim redundancy from the government like any other employee. Ask us about this.
It might be easier to see the creditors voluntary liquidation process in a flow chart
Watch the video below to understand a bit more about voluntary liquidation
- Cheapest Way To Liquidate a Company
- Guide to Liquidation Fees
- Are Directors Liable For The Debt In A Limited Company?
- Starting A New Company Post Liquidation - A guide for directors
- How Long Does It Take To Liquidate A Company?
- What does a liquidator do?
- How to liquidate a company
- Creditors Voluntary Liquidation CVL - Frequently Asked Questions
- What Is The Difference Between Voluntary Liquidation and Compulsory Liquidation?
- Putting a business into liquidation in Scotland
- The Costs of Voluntary Liquidation
- New 2022 complete guide to Creditors Voluntary Liquidation
- Should I liquidate my company?
- Disadvantages of Liquidation
- Does Liquidation Affect My Credit Rating?
- How To Wind Up A Limited Company
- Advantages of Liquidation
- Who gets paid first when a company goes into liquidation or administration
- What is a Phoenix Company And Are They Legal?
- A guide to IR35 (off-payroll working)
Download our free 2022 (covid updated) 50 page pdf experts guide to creditors voluntary liquidation for more free information