Voluntary Company Liquidation
Is your business facing Insolvent Company Liquidation? Whether it’s Voluntary or Compulsory Liquidation, the experts at Bridge Newland can advise, support and help to make the process as stress-free as possible.
What is Voluntary Company Liquidation?
Voluntary Company Liquidation, otherwise known as Creditors’ Voluntary Liquidation (CVL), is the most common form of Liquidation in the UK. It is a formal insolvency procedure involving the directors of an insolvent company voluntarily agreeing to wind their company up, as they cannot pay their creditors in full. A company is insolvent when it cannot afford to pay its debts, or in other words, unable to pay its bills when due.
To place a company into voluntary liquidation, resolutions to wind up the company and appoint a liquidator must be passed by the members and be ratified by creditors. The members usually pass their votes by post, to be dated when the creditors part is complete. The creditors then pass their resolutions either by an automatic approval process by post (once a set date has passed), by virtual meeting, or by a vote in person at a physical meeting (if a requisite majority of creditors request a physical meeting). Bridge Newland’s standard practice is to follow the deemed consent route, allowing for automatic approval by post unless objected to by a certain number of creditors, at which point a physical meeting is held. The deemed consent process is considered to be less disruptive to trade and is often more convenient to all parties.
To decide upon whether a CVL is right for your Company, we would recommend that you contact one of our experienced professional advisers whom will review the financial affairs of your company with you, in as much detail as you’d like to provide, and will offer their expert advice on the Voluntary Liquidation process and whether we can act as your Liquidator. All initial advice is free of charge.
See here for further details on out Licensed Insolvency Practitioners.
The Creditors’ Voluntary Liquidation (CVL) process officially begins from the time the resolution to wind up the company has been passed by both the members and the creditors. All trading will usually cease prior to this time and any company assets, not already sold, are then sold by the Liquidator in order to repay creditors as much as possible.
What will the Company Liquidation process involve?
Initially, Bridge Newland advise directors on their best method of trading and asset disposal up until the Liquidation is confirmed as in some circumstances, the assets are better sold by the directors pre liquidation. However, once the company is in liquidation, an Insolvency Practitioner from Bridge Newland – the Liquidator – will take control of your company’s affairs. At this point, pretty much all powers had by the directors will come to an end. As the Liquidator, we will then seek to sell any remaining saleable assets in order to maximise the realisations for the benefit of the creditors. We also collect in any debtors and refunds and once the agreed liquidation fees and expenses are paid, any remaining monies are divided amongst the creditors in the order specified in the Insolvency Act.
Until all of the affairs of your company have been resolved, we have a requirement to provide annual progress reports to creditors, summarising our works in each yearly period. As part of the process, we must also produce a report for the Secretary of State, under the Company Directors Disqualification Act 1986, regarding the behaviour of the insolvent company’s directors.
During the Voluntary Company Liquidation process, there are a number of tasks company directors must carry out:
- They should provide Bridge Newland, as the Liquidator, with information about the company’s affairs and respond to any investigative questions.
- They need to look after and hand over the company’s assets to us, the Liquidator. This should include all books, records, bank statements, accounting backups and other important documents that relate to your company’s assets
When will the Company Liquidation process end?
Each case is different, so there is no straightforward answer as to how long the Voluntary Company Liquidation process will take. However, typically most liquidations last 12 months.
Once all of the company’s affairs are wound up, we – the Liquidator – will notify all members and creditors of the closure of the ace and provide a final account.
After the final account has been sent to members and creditors and an 8-week period to challenge fees has elapsed, this can then be filed at Companies House and the company is then dissolved after a further 3 months from the date it is filed. Once the company is dissolved, it will no longer exist.
The Liquidator is granted his release from office at the point that the final account is filed with Companies House and therefore ceases to act as the Liquidator from this point.
What are the advantages of Voluntary Company Liquidation?
Being in debt is challenging enough for any company director, but the situation becomes even more distressing when those debts cannot be repaid. In cases like these, Voluntary Liquidation might be the most practical and stress-free option for you and your company. Here are some advantages of CVL:
- As director, you will be seen as proactively maximising returns for creditors. This will be deemed as positive behaviour as the procedure continues
- As director, you are not restricted from trading again in the future (including as a phoenix company or starting over in the same industry)
- Voluntary Company Liquidation is one of the quickest procedures, which will be beneficial to your employees, who will receive compensation from the redundancy payments office in good time (members of staff will be made redundant by us, the Liquidator and if eligible, can claim for redundancy pay)
- As director, you remain in control of the process. Plus, any legal action against your company will be stopped once it is in Liquidation
- As long as you have not signed any personal guarantees, creditors will not be able to take action against you personally for payment of the company’s debts.
- The Voluntary Company Liquidation procedure is one of the most cost-effective, as directors will only need to pay for arranging a Statement of Affairs and drafting the paperwork to place the company into liquidation. Other than that, there is very little to fund, as any professional fees are paid for by the sale of the company’s assets (if sufficient)
- You can avoid any court processes, which in particular will prove beneficial to your reputation, as you’ll be showing that Liquidation was a voluntary choice rather than an order
- As this is a voluntary process, directors can receive any pre-insolvency advice about the impact Liquidation might have on them personally, so they can take necessary, well-informed action
What are the disadvantages of Voluntary Company Liquidation?
While there are many advantages to Voluntary Company Liquidation, there are a handful of disadvantages too:
- You and your company are less protected against current legal actions from creditors than in other more formal insolvency procedures as it is not a court driven process so cannot stop some legal actions from continuing
- There are some restrictions and logistical issues which you may experience, going forward, should you (as a director) wish to set up and trade a new business (especially if that business has a same or similar name).
What is Compulsory Company Liquidation?
Voluntary Company Liquidation is different to Compulsory Company Liquidation. Compulsory Company Liquidation is when a company is forced into Liquidation by its creditors, following the approval of a Winding Up Petition in court. This is usually because a company does not have the funds to pay the costs of Voluntary Liquidation.
What does the Compulsory Company Liquidation process involve?
Compulsory Company Liquidation will involve a court hearing, to decide whether the company should be placed into Liquidation. The Official Receiver (a government body) then tends to deal with the Liquidation, rather than a professional, independent Insolvency Practitioner.
What are the advantages and disadvantages of Compulsory Company Liquidation?
While Compulsory Company Liquidation might be a cost-effective option, it definitely comes with far more disadvantages, including:
- It’s a lengthier process and therefore, less time-efficient
- Compulsory Liquidation can reflect badly on directors as directors are often seen to have ignored their obligations to take voluntary action to close their business therefore, the standard investigations can be stricter with less commercial outcomes.
- Being wound up by the court will appear on Companies House records
To avoid Compulsory Company Liquidation happening, you should contact Bridge Newland. Our team of specialist Insolvency Practitioners are here to support you before it’s too late. We will provide expert Liquidation advice (initially free of charge), if you feel your company is insolvent.
Do you need to speak to a professional Liquidation specialist?
If you are concerned about Liquidation or your company’s financial affairs, then get in touch with the highly-skilled and experienced team at Bridge Newland. We provide bespoke advice to companies across the UK, including the likes of Rugby, Birmingham and London.
Call our free phone number: 0800 612 6197. Our experts will provide you with bespoke advice and suggestions tailored to suit your individual circumstances.