What is Creditors Voluntary Liquidation (CVL)?

Step 1

Board of Directors Meeting

For a company to be wound up under the Companies Act 2006, the board of directors must first appoint a licensed insolvency practitioner as a liquidator and then agree to a special resolution at a meeting to authorise this appointment.

Shareholders and creditors ordinarily meet on the same day, this meeting must take place within 14 days for there to be sufficient time for the notices to be served to the creditors.

Step 2

The Period Between the Director’s Meeting and the Creditor’s Meeting

During this time, the directors must make sure they have helped the licensed insolvency practitioner obtain as much financial information including a formal handover of all accounting documents and a detailed valuation of all company assets. This will supply the information needed to draw up a Statement of Affairs to be presented to the creditors in the upcoming meeting.

Also during this time, the licensed insolvency practitioner will provide a system for employees to submit RP1 forms used to claim redundancy pay and other statutory entitlements including pay in lieu of notice, holiday pay, and arrears of wages.

Step 3

Shareholders Meeting

Before the meeting convenes a Statement of Affairs must be agreed upon and signed by the directors. The statement includes the information obtained from accounting documents and valuation reports from the company agents.

The Chairman of the Shareholders Meeting (who is also a board director) will present the Statement of Affairs on behalf of all shareholders and ask for approval for the proposed liquidation solution.

For the liquidation process to begin the vote must be 75% in favour of the proposed resolution.

Step 4

The Creditors’ Meeting

The creditor’s meeting will be held on the same day, usually within an hour after the shareholder’s meeting. Alongside the nominated Chairman of the meeting, an insolvency practitioner will be present in the creditor’s meeting.

A report drawn up by the licensed insolvency practitioner outlining the financial position of the company will be prepared for the Meeting of the Creditors. This report will provide the required information about the company including parts of the accounting documents from over the last 3 years, details of the trading history and the agreed-upon Statement of Affairs. Within the Statement of Affairs, there will be a list of creditors and details from the deficiency account.

Step 5

The Company in Liquidation

Once the chosen Liquidator is appointed, they will be tasked with dealing with the formalities of their position, for example, notifying the company. Depending on the type of company or the complexity of the situation, the liquidator will face a number of problems.

• With professional agents, the liquidator will deal with the formal disposal of assets
• Investigate the books and records within 3 months of appointment by submitting a report to Insolvency Services.
• Working with other recovery agents on other assets of the company.
• Redundancy claims of former employees.
• If funds are available the creditor’s claims will be dealt with and funds will be distributed accordingly.

Step 6

Concluding the Liquidation

Upon completion of the Creditors’ Voluntary Liquidation, the company will be dissolved. The Insolvency Act 1986: sets out an order of priorities. The liquidator will advertise for claims and establish a final cut-off date for paying the creditors.

They will then take final steps to agree to the final receipts and payments. The company will then be struck off the Companies House register. Any liabilities will be then written off. Any outstanding personal guarantees made by the directors can then still be pursued by the creditor via the guarantor.