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What is Creditors Voluntary Liquidation (CVL)?

5th October, 2023

Written ByEric Walls MIPA FABRP

Director of Insolvency and Turnaround

Eric is a licensed insolvency practitioner regulated and licensed by the Insolvency Practitioners Association. His ethos is always "give the right advice, choose the right options, rescue first if possible." He has many years’ experience in accounting and insolvency having worked at Touche Ross (Deloitte) and has been involved in turnaround and insolvency since the late 80's.
Keith and Eric first met in a pub in Darlington in 2000(!) and have worked closely ever since, with Eric as a partner in Marlor Walls and now a director of KSA Group.
Eric has acted as nominee and supervisor of over 350 CVAs in that time and knows the pressures and difficulties of that approach on all parties involved in making the effort for a successful rescue of the business.
From smaller “family owned” companies, to businesses with a turnover exceeding £20 million, a CVA can prove an invaluable rescue package, securing not only a better return for creditors than might otherwise be generated, but also allowing the business to survive and to continue to work with its trusted suppliers.

  • Who Can Put A Company Into Voluntary Liquidation?
  • What Are The Implications for Directors and Employees?
  • When is it necessary for the directors of the company to think about creditors voluntary liquidation?
  • The Liquidation Procedure
  • How Much Does Creditors’ Voluntary Liquidation Cost?
  • What if there are no assets to pay for the voluntary liquidation?
  • How Long Does the Process Take?
  • Is It Possible To Reverse A Creditors Voluntary Liquidation?
  • What happens after the liquidation is completed?
  • Can I Start A New Company After Liquidation?

Creditors’ Voluntary Liquidation (CVL) is a formal insolvency process, under the Insolvency Act 1986, that allows a company’s directors to initiate the winding-up of an insolvent company’s affairs. This process is conducted under the supervision of a licensed insolvency practitioner (IP) and aims to ensure that the company’s assets are sold to repay its creditors.  The term “voluntary” is used because the directors have volunteered to put it into liquidation as opposed to being forced to in a “compulsory” liquidation.

Who Can Put A Company Into Voluntary Liquidation?

A CVL is initiated when the directors of a company determine that the business is insolvent, meaning that it is unable to pay its debts when they fall due or its liabilities exceed its assets. The directors then convene a meeting of the company’s shareholders, who pass a resolution to place the company into liquidation and appoint an IP to act as the liquidator.

Once the liquidator is appointed, they will take control of the company’s affairs and assets, and work to realise the value of the company’s assets through the sale of its property, stock, and other assets. The proceeds from the sale are then used to pay off the company’s creditors, with any remaining funds distributed among the company’s shareholders.

What Are The Implications for Directors and Employees?

Remember a CVL can help to protect the directors of the company from further legal action, as long as they have acted in good faith and taken appropriate steps to minimize the impact on creditors. However, if the directors are found to have acted recklessly or fraudulently, they may still be held liable for any losses suffered by creditors.  It is therefore risky to delay taking action as the situation is likely to get worse for creditors over time.  As directors you have to act in the best interest of creditors once the company is insolvent.  If you are not sure if your company is insolvent then look at these tests for insolvency.

A CVL can have implications for employees of the company, as their contracts of employment will be terminated when the company enters liquidation. In some cases, employees may be entitled to claim redundancy pay from the government’s National Insurance Fund.


When is it necessary for the directors of the company to think about creditors voluntary liquidation?

  • 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 has built up too much debt.
  • The directors are worried about wrongful trading.

The Liquidation Procedure

  1. Board Meeting: The directors convene a board meeting to assess the company’s financial position and determine if it is insolvent. If they agree that CVL is the appropriate course of action, they will pass a resolution to initiate the process.
  2. Appointing an Insolvency Practitioner: The directors must appoint a licensed insolvency practitioner (IP) to act as the liquidator. The IP’s primary responsibility is to oversee the liquidation, realize the company’s assets, and distribute the proceeds to the creditors.
  3. Shareholders Meeting: Usually just before the creditors’ meeting where the shareholders agree to place the company into liquidation
  4. Creditors’ Meeting: The IP will convene a creditors’ meeting, typically within 14 days of the board meeting, to inform the creditors about the company’s financial position, the proposed CVL process, and to seek their approval. At this stage the creditors get to see what is termed an estimated Statement of Affairs (SofA).  This document sets out what the position of the company is, what it owes it creditors and whether there is likely to be any dividend paid out.

Using the deemed consent process there is no need for an actual creditors meeting.  Notices go out about the proposed liquidators and if no objections are raised within 14 days, then the liquidation process starts.

  1. Liquidation Commences: If the creditors approve the CVL, the liquidator will commence the process of realizing the company’s assets, settling any legal disputes, and distributing the proceeds to the creditors.
  2. Finalization: Once all assets have been realized and the proceeds distributed, the liquidator will prepare a final report and hold a final creditors’ meeting. After this, the company will be dissolved, and its name removed from the register at Companies House.

The process stops creditor pressure and associated worries. It ends those sleepless nights and ultimately helps you get on with your life.

So, if you would like to liquidate your company, call us on 0800 9700539. 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 liquidation 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;

  1. The number of creditors and how much is owed.
  2. How many employees there are
  3. Are there any book debts to collect
  4. 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 our minimum fee is £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 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.

What if there are no assets to pay for the voluntary liquidation?

This is a common question.  If there are no assets or monies in the company then the director(s) will have to pay the fee personally. It is reasonable to assume that much of the money for the fee will have been drawn out by the directors as either salary or dividend.  As such, indirectly the company is paying!

It is possible that directors can claim redundancy, like any other employee, from the Redundancy Payments Office (RPO).  However, be warned, this is by no means guaranteed and there is extra scrutiny of directors by the RPO. If you owe the company money then this will be offset what you are entitled to.

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. 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 liquidation is completed?

When 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

One of the advantages of a CVL is that it allows for an orderly wind-down of the company’s affairs, which can help to maximize the value of its assets and ensure a fair distribution of funds to creditors. It can also help to avoid the need for a compulsory liquidation, which can be more expensive and time-consuming.

Can I Start A New Company After Liquidation?

You can be a director of a new company after you have liquidated the old one.  However, there are some rules governed by the Insolvency Act 1986 Section 216 that puts resrictions on the reuse of company and trading names.  Be careful about reusing names and read our advice on this here

Recent Insolvency Statistics as they relate to Creditors Voluntary Liquidations

In the second quarter 2023 Q2

  • Creditors voluntary liquidations totalled 5,240 (a 9% increase from Q1 2023 and a 7% increase from Q2 2022). CVLs accounted for 83% of cases.


Watch the Video Below That Explains The Process

helpful advice for trading whilst insolvent

Trading Whilst Insolvent – Worried Directors Guide

Trading whilst insolvent is a legal term used to describe a business which continues trading when it cannot pay its debts and its liabilities are greater than its assets.  It can lead to a breach of several provisions of the Insolvency Act 1986 which can result in the directors being held personally liable

Trading Whilst Insolvent – Worried Directors Guide

What Happens To A Company After It Goes Into Liquidation?

After a company goes into a liquidation process, its assets, i.e. property and stock, are "liquidated" - turned into cash for payment to the company's creditors, in order of priority. This results in your company being removed from the register at Companies House as it ceases to exist.There are three types of liquidation:Creditors Voluntary Liquidation Compulsory Liquidation Members Voluntary Liquidation (cash is returned to the members as the company is solvent)Note that shareholders and directors start the voluntary liquidation process. However, in compulsory liquidation, the creditors start the process by applying for a court order. What is Creditors Voluntary Liquidation? Creditors voluntary liquidation (CVL) is the most common process in the UK, with about 15,000 of these liquidations each typical year.Usually, the company runs out of cash and cannot pay its debts on time. The directors are concerned that the business is simply not viable as creditors threaten legal action. In essence, it is appearing as an 'insolvent company'.The company directors then ask a liquidator, who must be a licensed insolvency practitioner (IP), to convene a meeting of the company's creditors within 14 days. At the meeting, which is now often held virtually, the IP will present a statement of affairs of the company to outline the current position and explain the procedure. The creditors then vote on the appointment of the liquidator to "liquidate" the assets to try and repay them (hence it is called a "creditors" liquidation).Once the liquidator is appointed, the directors no longer have any control or duties in relation to the company, but they are duty-bound to cooperate with the licensed insolvency practitioner and provide information in a timely manner. The IP will then look into the directors' and if there has been very bad practice, misfeasance or fraud, they may become subject to a disqualification. What happens to the assets after liquidation? After the company has gone into liquidation the assets (if there are any!) are sold in order to pay back the creditors.  The Insolvency Practitioner will often employ a Chartered Surveyor to achieve the best price so they can't be accused of selling assets on the cheap.  Sometimes the directors can buy back the assets after liquidation but again they must be at a fair price. What happens to the debts after the liquidation? If the assets sold do not cover any or part of the debts then they are effectively written off.  However, if there are some monies to be distributed then the creditors are paid in accordance with their ranking.  See this page for the creditors ranking.   Generally in a liquidation the unsecured creditors get nothing. What happens to the shares after liquidation? The shareholders are the very last in line for getting any payout from the sale of assets.  So, basically the shares are worthless.  Any shareholder can write these losses off against tax. What are the implications for the directors after the liquidation?As a director, if you owe the company money, i.e. have an overdrawn directors loan account, then the liquidator will seek to claim this from you. If the loan is substantial and not justifiable, they will take action against you. Personal guarantees will be called in if applicable as lenders are unlikely to get all their money back. The liquidator will investigate your conduct, but as long as you have behaved reasonably and properly then there shouldn't be anything to worry about. Be aware that the use of Bounce Back Loans to fund personal spending over and above what would be expected in normal times could cause you problems. See this page for more information. You may find that gaining senior employment in sensitive government departments/insurance companies and banking will be a bit more difficult as you may need to go through a "vetting procedure."Can the directors start a new company after liquidating the old one? You can liquidate a company and start the same or a new business again, but only under strict rules and conditions. Restarting is a potential legal "minefield" and you need to take proper advice.In summary;Most importantly, you cannot use the same or similar trade or business name as the liquidated company without leave of the court or permission from the IP. HMRC will likely ask for a VAT deposit from the new company if they have been a significant creditor in the previous company. You may find that business insurance will be a bit more expensive, or less choice, for you in any new company.Call us or read our Experts Guide to Creditors Voluntary Liquidation (see link below) if you want more details. Likewise, call us on 0800 9700539 for a free chat through your company's issues.Why not download our 2022 voluntary liquidation guide?Additionally, if you would like to liquidate your company, call us on 0800 9700539 or you can fill out a form on our website and get a quote in minutes. We can talk you through the process, organise the legal paperwork and begin proceedings. What Happens In Compulsory Liquidation? A compulsory liquidation is when the company's creditors have lost all patience to try to collect the debt. The debt must be over £750, undisputed, and the creditor must have notified the debtor of its intent to collect the debt. This often involves issuing a statutory demand first. If the debtor fails to pay the Statutory Demand in 21 days and does not dispute the debt, then the creditor may issue a winding-up petition.If the judge grants the winding-up order, then the official receiver will interview the director and liquidate the assets of the business to try and repay the creditors. This process generally takes much longer than a voluntary liquidation and is more stressful and hassle for the directors involved. What is more, the official receiver has more resources and a willingness to use their powers to investigate the behaviour of the directors. They will also have more resources to pursue any money that the directors owe the company which could result in personal insolvency. Can I stop the process? Once a winding-up petition is issued then it is difficult to stop the process. The only way to stop the liquidation is to pay the debt or get the petitioner to agree to withdraw the petition. It may be possible to get an adjournment of the winding-up hearing to allow more time to find the funds or maybe even get a company voluntary arrangement organised, but you will need to move very quickly! What are the implications for the directors in a compulsory liquidation? As mentioned earlier, it is likely that the official receiver will more aggressively collect monies owed by the director to the company. The directors have to attend a lengthy interview process at the court. They also have more resources to use their powers to investigate the directors’ actions compared to a liquidator in a voluntary liquidation. What Happens In A Members Voluntary Liquidation? A Members Voluntary Liquidation (MVL) is the formal process to bring a solvent company to a close. It can be known a 'solvent liquidation'. A licensed insolvency practitioner is appointed as liquidator and will realise the company’s assets, settle any legal disputes and pay any outstanding creditors and then distribute the remaining surplus funds to the company’s shareholders/members. In a MVL, the company must have paid or be able to pay all of its creditors and contractual liabilities. Once the liquidator has completed these formalities and received clearance from HMRC, the company will be dissolved and formally removed from the companies register, meaning it will no longer be registered at companies house.An MVL requires 75% of shareholders who have been given notice of the meeting of members to pass the winding-up resolution.This type of liquidation is appropriate when a company plans to close or wants to reduce taxes.And now to some common questions, we hear: What is the process? Each type of liquidation has a similar yet unique approach. There are some basic steps that each liquidation involves:The appointment of an insolvency practitioner/liquidator Liquidation of the assets of the company. Creditors, in order of priority, are paid using the liquidated funds. Shareholders receive any extra cash once everyone else has been paid according to their priority.In most situations, the end result is the company ceasing to trade, thus being struck off the register at Companies House. How much time does it take? This is variable to each situation. Once the insolvency practitioner is appointed, it takes between 2 and 3 weeks for the company to be placed into liquidation.Remember:If you have received a statutory demand from a creditor, you only have 21 days to pay it, and if unable to be settled, a winding-up petition will be applied for by the creditor (since they have the right), which takes up to 2 weeks. Within 14 days of the winding-up petition, it is a legal requirement to conduct and engage in a winding-up hearing.Until the process is fully complete, the liquidator remains responsible in overseeing the process in its entirety. To find out more about the role of the liquidator, see our page here. How much does the process cost? 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! Liquidation is a highly regulated insolvency process and there are NO shortcuts. Who gets paid first after a company goes into liquidation? Employees If you are an employee of the business, you may not receive your last month's wages, but you will be able to claim from the redundancy payments office for arrears of pay, holiday pay, and money in lieu of notice. You are unlikely to receive any expenses that are owed to you. Please see our page for employees here. A creditor of the company Realistically, you are unlikely to receive much money in liquidation - maybe 5p in the £1. If you are a secured creditor, i.e. if you have a charge over the assets of the company, then you may receive more or even everything back, but it completely depends. For more information on who gets paid first in liquidation then see our page on creditors priority. 

What Happens To A Company After It Goes Into Liquidation?

Worried Director What Will Happen To Me After Liquidation?

in Company Liquidation What is …?

"A man in the pub said I cannot be a director of any other company if I liquidate my company. Is this true?"Actually, this statement is entirely false! Misconceptions like this frequently arise from individuals with limited understanding of the subject matter. Such misinformation can cause undue anxiety for directors considering liquidation, fearing it might personally affect them. Guess what? Listening to bar room experts, inexperienced accountants, or no insolvency specialist lawyers can stop decisions being made, this failure to make a decision is really what could land you in trouble. So how will liquidation affect me and how long does it take? Having a limited liability company means that the directors have little risk (or limited liability) if the company fails, as long as they have acted properly and acted in time. What is more, 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. But, and it is a big but, if you fail to act in time, fail to act reasonably, fail to keep books and records, continue taking credit KNOWING that the company cannot possibly repay it, then you ARE at risk of personal financial loss or worse such as losing your house. So, act now and get help for your company and more importantly start reducing your own risks.Voluntary liquidation is the quickest most efficient way to deal with an insolvent company that has no future. As a director of an insolvent company, you are at risk if you do not act. This risk RISES the longer you don't act to put the company into liquidation.If you fail to act and the company is wound up by the creditors (compulsory liquidation) then the Official Receiver (OR) will be appointed to liquidate the business and he or she will investigate the activity of the directors and the business over the last 2-3 years. This is known as a conduct report on each director.  If the OR can prove there was wrongful trading where, for instance, you have taken credit from a supplier or took deposits from customers when you knew that it was highly unlikely that you could pay them back, then you could be made personally liable.This is known as the "lifting of the veil of incorporation" that protects directors under limited liability. If this happens then you could made liable for PAYE, VAT and creditors monies from the time that you should have known the company had no reasonable prospect of surviving the problems it faced.Additionally, the directors may face disqualification proceedings under the Company Directors Disqualification Act 1986 for up to 15 years, they can be fined and may face the loss of personal assets like your home, or even personal bankruptcy.Look, if you as directors have acted naively you may not know that you have broken these laws, but now you do know, it is vital to ensure that you protect yourself as a director by acting quickly to cease trading and put the company into voluntary liquidation; or consider a company voluntary arrangement if the company is VIABLE if the problems are solved. What is Creditors Voluntary Liquidation and what does it mean for me? In short, liquidation usually means, the company's trading stops and it's assets are turned into cash or "liquidated".All other possible liabilities, like employment liabilities, landlord's rent or payments to lease companies are stopped. It really is the end of the company, but the "business" may survive if a phoenix is organised. Liquidation is a powerful way to END creditor pressure and let you get on with your life. What if I have signed personal guarantees? If you have signed personal guarantees or indemnities to lenders, then the liquidation could lead to them being called in if the bank cannot get its money back from the company. There is little that can be done about that, but you should not delay decisions on liquidation to try and prevent a PG being called in: just think what ALL of the company's debts landing on your shoulders would do. Also it should be noted that HMRC now rank ahead of floating charge holders in any liquidation since December 2020.  Consequently, this may well mean that lenders that you have personally guaranteed will get less recovery hence exposing you more.All banks will agree a deal to repay the PG over time - provided you work with the bank to reduce their exposure.One great piece of FREE advice - always make sure that ALL tax returns, VAT returns and annual returns have been completed and sent in and that other "compliance" issues are dealt with wherever possible. These are important processes and will help protect you as individual directors. It shows that you have been acting properly.  I have heard about directors being able to claim redundancy in liquidation If you have been employed by the company and made payments via PAYE then you will be able to claim redundancy from the government and this is in fact a very simple process (20 minutes to fill out a form and we can help with that) so there is no need really to employ a third party to make a claim.  This process has been open to fraud so the HMRC are cracking down on operators that claim to be able to get money back when there is not enough "paperwork".  It isn't worth the risk.  If it sounds too good to be true then it probably is!You need to learn more about the options. This is clearly a general guide so, if you have any worries at all, please, just call us and we will talk you through the situation free and with expert guidance for your situation. Call one of our advisors or if you prefer, call our IPs (insolvency practitioners) now:Just one CALL will help relieve the stress and get you out of the mess.Why not call 08009700539 or 020 7887 2667 now?We could help you start the liquidation process today.(8.15am till 5.00pm; Out of hours call on 07833 240747, Wayne Harrison (IP)  or Eric Walls (IP) on 07787 278527)Finally, please remember this: NO BUSINESS is worth losing your health, relationships, marriages or your children over. Act properly, take advice, get the problem sorted and then get on with your life. In a little while the stress will go and you can focus on other things that are more important.Want more information on liquidation? Get our new free 2023 Experts Complete Guide to Creditors Voluntary Liquidation that covers Bounce Back LoansWe are experts in liquidation, voluntary liquidation, administration, pre-pack administration, business rescue, corporate rescue and company rescue, we can help solve your problems but only if you talk to us. Call 0800 9700539 for help.or email us your worries at 

Worried Director What Will Happen To Me After Liquidation?

Can I claim Directors Redundancy in Liquidation?

When a company goes into administration or liquidation the directors of the business are in effect made redundant.  Their powers and duties as directors cease.  So, it isn't surprising to know that directors are in fact entitled to redundancy payments if they were employed by the company.  Given the company is insolvent then it cannot afford to make the payments, so instead the bill is picked up by the Redundancy Payments Office (RPO).  This fact can help alleviate some directors concerns about liquidation.  In any liquidation the employees are able to claim for arrears of Wages, accrued Holiday Pay and Pay in Lieu of Notice, and if they have been working for the same employer for two consecutive years are also entitled to receive a statutory Redundancy Payment.  The same applies to directors.  There are a number of companies out there claiming they can get large payments for directors but there are a number of caveats. What are the eligibility criteria? You must have been employed by the company and received a wage commensurate with your work. This is not often the case as directors usually pay themselves with dividends and take a minimum wage for tax reasons.  This was actually one of the reasons why many didn't benefit from furlough payments during the pandemic as they were not actually employees.You must have proof you were employed. Again just being paid via PAYE may not be enough.  You will need to show that you had a contract and that terms were set (these can be implied and not necessarily detailed in an employment contract) example terms might be holidays taken, sick leave, paternity.maternity payments, car allowances, pension provision etc.  ie all the usual things that an employee has.An employee may not work less than minimum wage. This is important as if you are putting in long hours and not being paid much then it actually means you are not an employee!  As such any claim will not be accepted. Small monthly payments will just be seen as extracting money from the company as an office holder not an employee. How do I apply? Once the company has gone into liquidation or administration then there is an application form that the directors can fill in.  It doesn't take long and there really isn't any need to employ a third party to do the claim for you.  Some companies are making some misleading claims about average payouts etc. How much am I likely to get paid? You will receive redundancy and loss of pay if you are entitled to it.  However, in most cases that we have dealt with the directors owe the company money and this negates any payout that is likely to be owed.  In addition, the Redundancy Payments Office (RPO) is getting very strict about claims, so a director that has taken out substantial dividends is unlikely to be regarded as an employee.

Can I claim Directors Redundancy in Liquidation?

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