What is a CVL?
If your company is struggling to pay its debts and you don’t believe its financial position is likely to improve, you may be considering your options. One of those options could be a Creditors’ Voluntary Liquidation, or a CVL as it is also known.
But what is a CVL and what does it actually mean for your business? In this article, we explain what a CVL is, when it may be appropriate, what happens during the process and what it could mean for you as a company director.
What does CVL mean?
CVL stands for Creditors’ Voluntary Liquidation. It’s a formal insolvency process that allows the directors of an insolvent company to take steps to close the business when it can no longer pay its debts.
The word ‘voluntary’ is important. Rather than waiting for a creditor to take action against the company, the directors choose to start the process. Shareholders then pass a resolution to wind up the company and a licensed Insolvency Practitioner is appointed as liquidator.
Once the CVL is complete, the company will eventually be removed from the Companies House register and cease to exist.
When might a CVL be appropriate?
A voluntary company liquidation may be worth considering when your company is insolvent, and there’s no realistic prospect of turning its financial position around.
Insolvency can mean the company can’t pay its debts when they fall due or that the value of its liabilities is greater than its assets. You might be struggling to pay suppliers, HMRC or other creditors or you may be facing increasing pressure over overdue payments.
Every company’s situation is different, so a CVL won’t always be the right route. Getting advice from an Insolvency Practitioner can give you a clearer picture of where the business stands and what options you still have.
What happens during a CVL?
Once the company enters liquidation, the appointed liquidator takes control of its affairs, and the directors’ powers largely come to an end.
Trading will usually have stopped by this stage. The liquidator identifies and sells the company’s remaining assets, collects money owed to the business and deals with creditor claims. Any available funds are then distributed to creditors in the legally defined order of priority.
The liquidator will also review the company’s financial affairs and the conduct of its directors as part of their statutory responsibilities.
What does a CVL mean for company directors?
Entering a CVL doesn’t automatically make you personally responsible for your company’s debts. A limited company is a separate legal entity, so its liabilities generally remain with the business.
However, directors can face personal liability in some circumstances, including where they’ve given personal guarantees. You’ll also need to cooperate with the liquidator, provide information about the company and hand over its records and assets.
Considering voluntary company liquidation?
Deciding to close a company you’ve worked hard to build isn’t easy. If financial problems are mounting, getting professional advice can help you understand your position before deciding what to do next.
Bridge Newland’s licensed Insolvency Practitioners have extensive experience helping company directors understand their options when a business is facing financial difficulty. We can review your circumstances, explain whether a CVL may be appropriate and discuss any other options that could be available.
Contact Bridge Newland today to arrange a free initial consultation.
Categorised in: Liquidation News