Creditors Voluntary Liquidation
We understand that being involved in a liquidation is a uniquely stressful and highly pressurised situation.
We guide our clients through the process and aim to use our experience to limit the impact on them as much as possible.
We are able to offer an extensive range of insolvency litigation services to:
- Companies, and
- Insolvency Practitioners
Our team of insolvency lawyers is experienced in advising in relation to a wide range of matters including:
- Transactions defrauding creditors
- Transactions at an undervalue
- Wrongful Trading | Fraudulent Trading
- Removal or replacement of liquidators
- Misfeasance claims against company directors
- Director disqualification
Our insolvency team is experienced in conducting litigation arising from liquidations of all types including:
- Compulsory liquidation
- Creditors Voluntary Liquidation (‘CVL’)
Got a question?
A CVL is the most common type of liquidation and is usually instigated by the directors because the company is insolvent. Although a court order is not required for a CVL, it is a formal insolvency procedure used in circumstances where the business is unable to meet its debts as they fall due or is close to reaching that stage.
The directors, in compliance with their fiduciary duties, take this step to voluntarily ‘wind the business up’. It requires the appointment of an Insolvency Practitioner as liquidator following a meeting of the company directors, shareholders/members and creditors. Once the appointment has been made, the company will cease trading and the Insolvency Practitioner will take over responsibility for the company and the realisation of its assets.
The first step is a board meeting for the directors to agree:
- that the company should be placed into a CVL due to the insolvent nature of the business
- that a meeting needs to be convened for the shareholders and creditors, and
- the selection of an Insolvency Practitioner as liquidator
Notices must be served on the shareholders and creditors regarding the meeting. The Notices must be advertised in the London Gazette a minimum of seven days in advance of the meeting.
The board of directors has an obligation to continue to trade but at the same time must be mindful to preserve the company’s assets for the creditors which means not:
- Extending credit facilities to obtain supplies or goods
- Using any bank overdraft facility
- Disposing of company assets, unless justified to meet essential costs of running the business
- Taking steps that would favour one creditor over any other creditors
- Taking steps that could penalise unsecured creditors in favour of a secured creditor
At the shareholders meeting, a Resolution is agreed to place the company into a CVL and to choose an Insolvency Practitioner:
- The liquidation commences on the passing of this Resolution
- The directors cease to have control of the company
At the subsequent Meeting of Creditors, the shareholders choice of Insolvency Practitioner is either agreed or the creditors appoint one of their own choosing. On appointment, the control of the company vests in the Insolvency Practitioner acting as liquidator. The Insolvency Practitioner will take steps to achieve the best market value for the assets of the company and distribute the proceeds to the creditors.
The Insolvency Practitioner will also conduct an investigation into the company affairs and its directors to consider whether there is any wrongdoing or breach of fiduciary duties. In order to discharge this duty, the Insolvency Practitioner will require all company officers to cooperate with his requests for information, meetings and interviews.
Our team of expert lawyers is here to guide you in relation to any issues concerning CVL or compulsory liquidations.
We are happy to provide an initial no obligation consultation at our offices in London, Birmingham or Manchester or via video conferencing facilities to explore the issues in your case and to provide an assessment of how we can assist you.