What is creditors voluntary liquidation?

What is Creditors Voluntary Liquidation (“CVL”)

A process called Company Winding- up and is led by Directors and shareholders.

The company ceases trading, and assets are liquidated – sold to pay creditors.

A CVL is initiated by the directors who pass a resolution proposing separate meetings of the company’s shareholders (known as “members”) and creditors be convened for the purposes of placing the company into liquidation and to appoint a Liquidator. The directors will nominate a Licensed Insolvency Practitioner to assist in this process and to accept the appointment as Liquidator.

At the meeting of members, the resolution to wind up the company must be approved by a 75% majority of members voting at the meeting in person or represented by proxy. At the creditors’ meeting, the creditors may either confirm the appointment of the Liquidator appointed by the members or nominate another of their choosing. Voting at the creditors’ meeting is by a majority (in value) or creditors voting either in person or represented by proxy.

Liquidation is the most used procedure for insolvent companies. Liquidation signals the end of a company’s trading. Once the liquidation is concluded the company is dissolved. Most companies that go into insolvent liquidation have already ceased trading, and it is very unusual for a liquidator to carry on trading to sell the business or assets as a going concern.

The appointed liquidator is obliged to carry out a statutory investigation into the affairs of the Company and the conduct of the directors and to report their findings to the Insolvency Service (“IS”).  Should the IS consider the conduct of the director to be unfit they may commence director disqualification proceedings.

Next Steps

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