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Creditors’ Voluntary Liquidation

Winding up the affairs of an insolvent company

Creditors’ Voluntary Liquidation (CVL) is the most common UK insolvency procedure, usually instigated by directors and shareholders to bring a straightforward end to a company’s existence.

Our Creditors Voluntary Liquidation Service

If a company cannot pay its debts or continue to trade, then a CVL will pass the responsibility of dealing with its assets to a liquidator, who will distribute the proceeds amongst the creditors according to statutory priorities.

We will prepare all the necessary paperwork the directors require to initiate the CVL process and arrange the necessary decision procedures for the company’s shareholders and creditors. The shareholders will be asked to pass a resolution to place the company into liquidation and appoint two of our licensed insolvency practitioners as liquidators.

The creditors will then make various decisions, including confirmation of the liquidators’ appointment. Our role is then to realise the assets whilst fulfilling various statutory filing and reporting functions. Then we would distribute the proceeds, after costs, amongst the creditors according to their entitlements. Three months after closure of the liquidation, the company is automatically dissolved.

When considering liquidation professional advice should be sought from us on the appropriate course of action. Our partners are licensed insolvency practitioners who can provide you with advice tailored to your requirements, assist with placing the company into liquidation and act as liquidators.

Case Study: CVL for a construction company

Mercer & Hole were engaged by the board of directors in Ireland. We assumed a role to coordinate and manage the liquidation of the group.

Read Case Study >
Case Study: CVL for a construction company

Frequently asked questions

What is a Creditors’ Voluntary Liquidation (CVL)?

A Creditors’ voluntary liquidation (CVL) is a statutory process to close a company when it is insolvency as a result of:
1. Having liabilities in excess of its assets, or
2. Being unable to pay its debts as they fall due, and therefore
3. Being unable to continue to trade as a going concern.

A CVL can pass the responsibility of closing the business, realising the assets, liaising with the creditors, and distributing the proceeds to creditors, to Mercer & Hole. Unlike Compulsory Liquidation, with a CVL, directors can nominate their own liquidator.

How do you initiate the CVL process?

The CVL process is initiated by the directors of a company, when a Company is insolvent and there is no possibility of the company continuing to trade as a going concern.

Mercer & Hole will discuss with the directors the options available to them to close the company and where appropriate advise how to convene the relevant decision procedure to put the company into liquidation and appoint joint liquidators.

What happens to employees when a company goes into CVL?

It is normal practice for companies that enter creditors’ voluntary liquidation to cease trading, for their assets to be realised and for creditor claims to be adjudicated by the joint liquidators.

As the company will cease to trade, employees will normally be made redundant, but are able to submit claims into the liquidation estate in respect of arrears of wages, holiday pay, pay in lieu of notice and redundancy pay. Claims will be submitted to both the insolvent estate, and subject to certain statutory limits, to the Redundancy Payments Service (“RPS”). Even where there are no funds in the insolvent estate, employees may receive a payment from the RPS.

How long does the CVL process take?

Depending on the complexity of the company, the number and nature of its assets, and the quantum and class of its creditors, a CVL it can typically take between six months and two years to wind up a Company’s operations and distribute the assets to the creditors.

Can you reverse a CVL?

Practically speaking, it is unusual for a company to seek to exit CVL other than by way of dissolution, however it may be possible via a CVA or through an administrative restoration, in certain circumstances.

Who pays for a CVL?

The company will normally pay for advice prior to a CVL, so that an Insolvency Practitioner can assist the directors in convening the necessary decision procedures and shareholder resolutions. Once in liquidation, a liquidators’ fees are normally paid from the proceeds of the estate with the approval of the creditors.

Is a CVL right for my company?

If the company is insolvent, its liabilities are greater than its assets and/or it cannot pay its debts as they fall due, then it may be appropriate for the directors to commence a CVL. We would recommend that directors speak to a licenced Insolvency Practitioner prior to determining the most appropriate course of action for their company.

Our Creditors Voluntary Liquidation Specialists

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