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Checklist for Creditors Voluntary Liquidation

Navigating the complexities of Creditors’ Voluntary Liquidation (CVL) can be a daunting task for directors facing financial challenges.

In this blog post, we’ll guide you through the CVL process, outline your responsibilities, and provide valuable insights with a “checklist for creditors’ voluntary liquidation.”

Understand the key differences between Creditors’ Voluntary Liquidation (CVL) and compulsory liquidation.

A licensed insolvency practitioner is responsible for managing the CVL process and ensuring fairness to all parties involved.

Directors must be aware of their responsibilities, and potential personal guarantees, communicate with stakeholders, comply with regulations.

Directors must assess available options before deciding on a course of action in order to ensure a successful CVL process.

The CVL Process: A Step-by-Step Guide

The CVL process comprises six stages, guided by an insolvency practitioner following an initial consultation.

Directors must act in the interest of creditors and provide financial information, hand over accounting documents, and value assets before the creditor’s meeting.

Adherence to these steps ensures a smooth and transparent liquidation process, minimizing the risk of complications and misunderstandings.

It is essential to understand that the duration of the company’s liquidation process is contingent upon the complexity of its affairs, including the number and type of assets.

By following the step-by-step guide outlined in this section, directors can better navigate the CVL process and fulfil their responsibilities.

Initial consultation with an insolvency practitioner

The initial consultation with an insolvency practitioner in CVL aims to ascertain if CVL is the most suitable route for the company and agree on a suitable date and time for the liquidation creditors meetings.

During this consultation, the insolvency practitioner will evaluate the company’s financial situation and provide guidance on the optimal course of action.

The first step in the CVL process involves appointing a licensed insolvency practitioner as a liquidator and approving a special resolution at a meeting to authorise this appointment.

This crucial step sets the foundation for the rest of the liquidation process, ensuring that a qualified and experienced professional is in place to guide the company through the challenging journey ahead.

Board of Directors meeting

The board of directors meeting must occur within 14 days to provide sufficient time for the notices to be served to the creditors.

The role of the licensed insolvency practitioner in the board of directors meeting in the CVL process is to provide guidance to agents, maintain communication with the company’s bankers, contact HM Revenue and Customs, and obtain financial information from the company accountants.

This meeting can be conducted either in person or virtually, such as through Skype or Zoom.

Directors must act in the best interests of creditors during this time and provide the insolvency practitioner with comprehensive financial information, including the formal transfer of all accounting documents and a comprehensive valuation of all company assets.

Shareholders meeting

The shareholder’s meeting in CVL serves to ratify the suggested liquidation plan and designate a shareholder liquidator.

The information required for the Statement of Affairs includes accounting documents and valuation reports from the company’s representatives.

This board meeting call is an essential part of the CVL process, as it ensures that each board meeting all parties involved have a clear understanding of the situation and the proposed plan of action.

Typically, 9 to 21 days’ notice is provided for the meetings, and both the shareholder’s and the creditor’s meetings are usually conducted on the same day.

This timeline allows for a smoother and more efficient process, minimising delays and ensuring that all necessary steps are taken in a timely manner.

Creditors’ meeting

The creditors’ meeting is where the creditors come together to determine the future of the company.

The insolvency practitioner’s report, which comprises the financial position of the company, accounting documents from the last three years, details of the trading history, and the agreed-upon Statement of Affairs with a list of creditors and details from the deficiency account, is presented at this meeting.

The designated Chairman of the meeting and an insolvency practitioner are present at the creditors’ meeting.

This meeting is a critical juncture in the CVL process, as it allows creditors to voice their concerns, ask questions, and gain a better understanding of the company’s financial situation and the proposed liquidation plan.

Understanding Creditors Voluntary Liquidation (CVL)

A Creditors’ Voluntary Liquidation (CVL) occurs when a company is unable to fulfil its debt obligations and there is no prospect of the business recovering.

The directors may then opt to initiate an ‘insolvent liquidation’ process, providing them with more control than compulsory liquidation, which is initiated by a winding-up petition.

The solvency or insolvency of a company will influence the manner in which it can be closed, and the company’s directors play a crucial role in this process.

Two key tests differentiate between short-term turbulence and genuine business bankruptcy: the cash-flow test and the balance-sheet test.

The cash-flow test evaluates a company’s ability to cover its liabilities both in the present and in the foreseeable future.

The balance sheet test compares the company’s assets to its current and future liabilities.

Understanding these tests can help directors determine the best course of action for their company.

Key differences between CVL and compulsory liquidation

CVL is a process for insolvent companies to cease operations, offering directors more authority than compulsory liquidation.

Compulsory liquidation is a process for insolvent companies to close down, wherein the court appoints a liquidator to assume control of the company.

On the other hand, a Members’ Voluntary Liquidation (MVL) is a process for solvent companies to close down.

This distinction is important because it highlights the different levels of control and decision-making involved in each type of liquidation.

The choice between CVL and compulsory liquidation can have significant implications for the company, its directors, and its creditors.

Opting for CVL allows directors to have more control over the timing and the liquidator appointed, as well as the potential to claim director redundancy.

Compulsory liquidation, however, involves a winding up petition and court intervention, which may result in less control for the directors and potentially greater financial consequences.

Role of a licensed insolvency practitioner in CVL

A licensed insolvency practitioner plays a crucial role in the CVL process, as they are mandated to manage the liquidation.

The liquidator can pursue claims against directors to recover funds from them personally if they have acted improperly with company assets or continued trading their family business when they were aware of the company’s insolvency.

Directors and shareholders are responsible for selecting and appointing the insolvency practitioner in CVL.

The liquidator will attempt to recoup funds for the benefit of the creditors if dividends have been declared and paid while the company was insolvent.

This highlights the importance of having a licensed insolvency practitioner oversee the CVL process and ensure that all parties involved are treated fairly and according to insolvency law.

Managing Company Assets and Debts during CVL

Selling company assets and settling debts with creditors is a crucial aspect of the CVL process. A specialist practitioner should handle the sell-off, and the liquidator contacts creditors based on hierarchy.

By efficiently managing assets and pay its debts first, the company can ensure that the liquidation process is fair and transparent, and creditors receive the best possible outcome.

Our licenced insolvency practitioners have helped directors in the following areas:

This authority allows them to make informed decisions that will maximize the return for creditors while ensuring that the process is conducted in accordance with insolvency law and regulations.

Selling company assets

In an asset sale, a firm dispenses some or all of its tangible or intangible assets. The seller maintains legal ownership of the company that has sold the assets but does not have any further rights to the sold assets.

The buyer does not take on any liabilities in an asset sale. This type of sale allows the company to raise funds to pay off debts and meet its obligations to creditors.

A specialist practitioner is the under director and designated party for the sale of company assets during CVL.

Their expertise in asset sales ensures an efficient process, maximizing returns for the company and creditors while minimizing impact on employees and stakeholders.

Settling debts with creditors

Settlement of debts with creditors during CVL involves negotiating with creditors to reach an agreement on a settlement amount and then paying off the agreed amount.

The order of payments in a company liquidation is as follows: secured creditors, preferential creditors, unsecured creditors, and finally, shareholders.

This hierarchy ensures that the most vulnerable creditors are prioritized and that the liquidation process is conducted fairly and transparently.

The liquidator should adhere to the court- prescribed hierarchy when contacting creditors.

By following this hierarchy and ensuring fair treatment of all parties, the liquidator and solicitor can minimize conflicts among creditors and facilitate a smooth liquidation process.

Directors’ Responsibilities and Personal Guarantees

Directors have a range of responsibilities during the CVL process, including working in concert with the liquidator and being responsible and open regarding financial matters.

In addition to these responsibilities, directors may have personal guarantees for company debts, which implies that they are personally liable for fulfilling the loan repayment should the company be unable to meet the obligation.

Understanding and fulfilling these responsibilities is essential for directors during the CVL process.

It is crucial for directors to be aware of the potential consequences of personal guarantees, as these can have a significant impact on their personal financial situation and future business endeavours.

By taking the necessary steps to manage these guarantees and fulfil their responsibilities during the CVL process, directors can minimise the risk of adverse financial and legal consequences.

Cooperation with the liquidator

Collaborating with the liquidator is essential in a Creditors Voluntary Liquidation (CVL), as directors are no longer in charge of the company, yet they are obligated to aid the liquidator if requested.

Directors must provide the liquidator with information regarding the company’s affairs, including financial records and paperwork, as mandated by law.

Cooperation between directors and the liquidator can facilitate a just allocation of assets to creditors and a seamless liquidation process.

By working together and maintaining open lines of communication, directors and liquidators can help to ensure that the CVL process is carried out efficiently, effectively, and in the best interests of all parties involved.

Consequences of personal guarantees

Defaulting on a loan with a personal guarantee can lead to serious financial and legal repercussions, including the seizure of assets to repay the debt.

Personal guarantees may be invoked during a Company’s Voluntary Liquidation, adding to the financial responsibilities of directors.

It is vital for directors to be aware of the consequences of personal guarantees and to take appropriate steps to manage these outstanding personal guarantees during the CVL process.

Understanding the risks of personal guarantees and fulfilling directorial responsibilities can minimize their impact on new and existing businesses, personal finances, and future ventures.

Informing Stakeholders and Compliance with Regulations

Directors must inform interested parties of a company’s closure, including employees, creditors, shareholders, HM Revenue & Customs, and any directors not involved in the wind-up process.

In addition to informing stakeholders, companies must comply with all relevant regulations during the CVL process, including advertising the liquidation in The London Gazette.

By ensuring that all stakeholders are informed and that the company complies with all relevant regulations, directors can help minimise misunderstandings, conflicts, and potential legal issues during the CVL process.

Clear communication and compliance with regulations are essential to a smooth and successful liquidation process.

Notification to Companies House

Notifying the Companies House of a Creditors Voluntary Liquidation involves submitting documents to inform them of the liquidation process.

Documents must be signed and submitted promptly either via the Companies House online service or by submitting a paper form signed by DS02.

By notifying Companies House and submitting required documents promptly, directors can ensure compliance with regulations and minimize legal complications during the CVL process.

Communicating with employees and other stakeholders

Informing employees and other stakeholders of the situation, discussing their rights, and providing updates on the liquidation process are all integral aspects of effective communication during a Creditors Voluntary Liquidation.

Employees and other stakeholders have the right to be informed of the new business situation, to be kept abreast of the liquidation process, and to be treated equitably and with respect.

Updates on the liquidation process can be provided through regular meetings, emails, or other forms of communication.

Ensuring that all personnel and stakeholders are kept abreast of any alterations or developments can help reduce fear and anxiety in times of crisis and uncertainty while ensuring that the message is reaching all intended parties.

Can CVL Be Reversed?

CVL can be reversed if all liabilities have been satisfied, and assets remain unsold, or the company has not been dissolved.

While reversing a CVL may not always be possible in certain cases, it is essential for directors to be aware of this potential outcome and to consider all available options before deciding on the best course of action for their company.


In conclusion, understanding the CVL process, director roles, insolvency practitioners, and personal guarantee implications is crucial.

By following the step-by-step guide provided in this blog post, directors can make informed decisions, fulfil their responsibilities, and ensure a smooth and transparent liquidation process.

Armed with this knowledge, directors can face the CVL process with confidence and clarity, ensuring the best possible outcome for all parties involved.

Frequently Asked Questions

What is required for creditors’ voluntary liquidation?

Creditors’ voluntary liquidation requires that the company pass a resolution to wind up the company with at least 75% of shareholders voting in favour.

Furthermore, a physical creditors meeting must be held should it be requested by at least 10% of creditors in value, 10% of creditors in number, or 10 creditors.

How long do creditors’ voluntary liquidation take?

Typically, Creditors’ Voluntary Liquidations can take between 6 to 24 months to complete.

The process of placing the company’s assets into a CVL itself usually takes around 14 days, but the length of the liquidation process depends on the size and complexity of the firm’s finances.

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