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Creditors’ Voluntary Liquidation (CVL)

A Creditors’ Voluntary Liquidation is the most common type of company liquidation in the UK. It is used when a company is insolvent, unable to pay its debts, and can no longer continue trading.

 

Is Your Company Struggling with Debt? CVL Might Be the Right Solution.

If your company’s debts have become unmanageable and creditor pressure is mounting, it can feel overwhelming. In such cases, a Creditors’ Voluntary Liquidation (CVL) could offer a structured and professional way to close the business and address its financial issues.

Unlike Compulsory Liquidation, where creditors force the company into closure through a court process, a CVL is a voluntary step initiated by the company’s directors and shareholders. It provides a more controlled and respectful way to wind down the business.

How Does It Work?

Once the directors decide that a CVL is necessary:

– The company generally stops trading immediately

– It must not incur further credit or liabilities, as this could worsen the position of creditors and potentially lead to personal liability for directors

– A licensed Insolvency Practitioner is appointed to manage the process

In some cases, directors, shareholders, or other connected parties (such as employees) may be able to purchase the company’s assets at market value and continue trading under a new entity. If you’re interested in doing this, inform the proposed liquidator and submit a formal offer.

Please note that there are strict rules on reusing company names, which a professional adviser can explain.

Benefits of a CVL

– Allows directors to proactively address insolvency in a professional manner.

– Provides a clean break, helping directors move forward.

– Reduces the risk of wrongful trading by ceasing operations at the right time.

– Enables creditors to submit claims in an orderly process.

– Directors can usually continue to act as directors in other companies (unless disqualified later).

– Employees affected by redundancy may be eligible for compensation from the Redundancy Payments Office (subject to conditions).

– Opportunity to buy back assets and potentially start a new business in the same industry.

Advice for Companies and Individuals

Members Voluntary Liquidation (MVL)

An MVL is, in essence, the liquidation of a company that is solvent.
A company is solvent by definition if it has assets sufficient enough to settle all liabilities in full plus statutory interest.

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Administration

Administration is a rescue process for businesses in financial difficulty which can sometimes result in the company becoming solvent again. Alternatively, a sale of the business could achieve continuity thus preserving employment and goodwill.
Administrators, who must be Licensed insolvency Practitioners, can be appointed by the company, the Directors, a creditor or by a direct application to the Court. During this process, the company is protected from any creditor taking any legal or enforcement action.

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Compulsory Liquidation

Compulsory Liquidation sees company assets being sold involuntarily, the staff being made redundant and ultimately being struck off the register.

Compulsory Liquidation is generally the least favourable insolvency process and best avoided if possible.

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Bankruptcy

If a situation arises where raising finance isn’t possible, your business is no longer viable and you have personally guaranteed money to creditors, one option available is bankruptcy.

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Individual Voluntary Arrangement (IVA)

If refinance isn’t the right solution for your problems, or you can’t find a lender prepared to offer the facilities you need to avoid bankruptcy, one possible solution is to enter an Individual Voluntary Arrangement (IVA).

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Documents

The following guidance sheets provide useful guidance of processes and other useful information. They are free to download.

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Members Voluntary Liquidation (MVL)

An MVL is, in essence, the liquidation of a company that is solvent.
A company is solvent by definition if it has assets sufficient enough to settle all liabilities in full plus statutory interest.

1/6

Administration

Administration is a rescue process for businesses in financial difficulty which can sometimes result in the company becoming solvent again. Alternatively, a sale of the business could achieve continuity thus preserving employment and goodwill.
Administrators, who must be Licensed insolvency Practitioners, can be appointed by the company, the Directors, a creditor or by a direct application to the Court. During this process, the company is protected from any creditor taking any legal or enforcement action.

2/6

Compulsory Liquidation

Compulsory Liquidation sees company assets being sold involuntarily, the staff being made redundant and ultimately being struck off the register.

Compulsory Liquidation is generally the least favourable insolvency process and best avoided if possible.

3/6

Bankruptcy

If a situation arises where raising finance isn’t possible, your business is no longer viable and you have personally guaranteed money to creditors, one option available is bankruptcy.

4/6

Individual Voluntary Arrangement (IVA)

If refinance isn’t the right solution for your problems, or you can’t find a lender prepared to offer the facilities you need to avoid bankruptcy, one possible solution is to enter an Individual Voluntary Arrangement (IVA).

5/6

Documents

The following guidance sheets provide useful guidance of processes and other useful information. They are free to download.

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Creditor Portal

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Get in Touch

All initial meetings are free and confidential. The first consultation will help us establish the current position and allow us to present a range of options available to you.

Send us an email at restructuring@groupams.co.uk or call us on 0161 413 0999.

Disclaimer

AMS Business Recovery & AMS BR is the trading name of Path Business Recovery Ltd, a company registered in England and Wales. Gareth Howarth & Philip Lawrence are Licensed Insolvency Practitioners authorised to act in the United Kingdom by the Insolvency Practitioners Association.

 

The company’s registered address is 1 Hardman Street, Spinningfields, Manchester, M3 3HF. Registered in England and Wales No.: 10149403. VAT No: 242 7332 23

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