Creditors' Voluntary Liquidation (CVL)
A CVL is the most common method of placing a company into liquidation and will ultimately result in bringing the company to an end.
When is a CVL appropriate?
A CVL might be deemed necessary if the directors have identified that the company is insolvent or cannot avoid becoming insolvent. Alternatively, the directors of the company may wish to wind it up, but are unable to swear a “declaration of solvency” (See also Members’ Voluntary Liquidation)
The CVL process
If a CVL is considered necessary, the directors must first pass a board resolution to convene an Extraordinary General Meeting (EGM) of members. A Statement of Affairs must be prepared and sworn by the Directors, and at the EGM members must pass a resolution to appoint a Liquidator.
A Meeting of Creditors will then be required to ratify this appointee, or to appoint an alternative Liquidator.
Once appointed, the Liquidator must realise the assets of the company, make distributions to creditors and investigate the company’s affairs.
Here at Gibson Booth we prepare all the necessary paperwork and work with the directors and shareholders throughout the CVL process.
Please call Ted Wetton on 01226 215999 if you are the director or shareholder of a company and believe that it is insolvent, or would like further advice. Alternatively, ask your company’s existing professional advisors to contact us to discuss the options available.
Important: Your responsibilities as a director
A company is insolvent if it is unable to pay its debts as they fall due; and if its assets are less than the amount of its liabilities, taking into account its contingent and prospective liabilities.
Directors have a primary duty to act in the best interests of the Company, but once they become aware that the Company is in an insolvent state their duty is instead to act in the best interests of the creditors generally. If the directors continue to trade the company after they are aware, or ought to have concluded, that it is insolvent, they may be exposed to personal liability for any loss to the creditors (this will be decided by an investigation into the affairs of the company and the actions of its directors in the event of a winding-up).
If you are the director of an insolvent company you should take advice immediately.
Gibson Booth will advise you on the best course of action, whether it is refinancing, restructuring or liquidation. Initial advice is free and without obligation.
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