A CVL is a legal procedure for closing an insolvent company where there is no prospect of preserving all or part of the business.
What is a Creditors Voluntary Liquidation?
A CVL is a legal procedure for closing an insolvent company where there is no prospect of preserving all or part of the business.
A Licensed Insolvency Practitioner (IP) is appointed as liquidator and is responsible for closing the company, realising its assets (typically selling vehicles, stock and equipment and collecting debtors) and distributing available funds to creditors.
Because this is an insolvency procedure, the value of the company’s asset will be less than is owed to creditors, so creditors will not be repaid in full. Very often they will only receive a small proportion of the money they are owed, perhaps nothing at all.
For more information, check out our Step-by-Step Guide to CVL.
What’s the process for a Creditors Voluntary Liquidation (CVL)?
A CVL is initiated by the directors of the company. They will hold a board meeting where an IP is appointed to assist them with the formalities for placing the company into liquidation.
The first of these formalities is a shareholders’ meeting, which usually takes place within one or two weeks of the initial board meeting. At this meeting the liquidation formally begins, and a liquidator is appointed.
The second technical step involves giving creditors the opportunity either to ratify or replace the liquidator chosen by the shareholders. This part of the process can be done in several different ways, but it is typically done by a virtual meeting (a conference or video call), which takes place shortly after the shareholders meeting.
This gives creditors the opportunity to ask questions about events leading up to the liquidation and, if they wish, to replace the liquidator appointed by the shareholders with a different liquidator. The creditors meeting may also be asked to approve an estimate of the liquidator’s fees.
