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Creditors Voluntary Liquidation

Creditors Voluntary Liquidation, more commonly referred to simply as a CVL, is an insolvency procedure that involves your company entering liquidation and its assets being sold by a liquidator.

Is your business struggling with severe cash flow issues and a business model that just doesn’t seem to work? If your company is insolvent and unlikely to recover, the voluntary liquidation process could be the most effective way of paying creditors.

 

Creditors Voluntary Liquidation, which is also known as a CVL, involves the sale of your company’s assets by a liquidator. The cash raised from selling the assets is used to pay your company’s creditors, ensuring they receive part of what they are owed.

Although the CVL process will close your company and end its trading life, it’s a far better option than the compulsory liquidation process, which could lead to charges of wrongful trading against a company’s directors.

Introduction to FRP

  • What is Creditors Voluntary Liquidation?

    Creditors Voluntary Liquidation, more commonly referred to simply as a CVL, is an insolvency procedure that involves your company entering liquidation and its assets being sold by a liquidator.

    As its name suggests, a CVL is a voluntary process that you can initiate as a company director. Unless you’re charged with wrongful trading, you will be able to establish a company in the future and trade without serious restrictions.

    The alternative to a CVL is compulsory liquidation – liquidation that is initiated by a creditor to recover cash owed by your company. This form of liquidation has more legal risks for your company’s directors, and is generally not a preferred outcome.

     

    Understanding Creditors Voluntary Liquidation

    Since a CVL will result in your company closing and its assets being sold, it’s not the best option for viable companies that could potentially recover. If your company has no chance of recovery, however, a CVL could be its best option.

    Most companies start the CVL process after discovering that they are insolvent and can’t afford to pay creditors. A CVL is often prompted by the receipt of a statutory demand from a creditor that demands immediate payment of a debt.

    If you feel that your company doesn’t have a future and can’t continue trading even with the use of a solution such as a CVA or Administration, liquidation can be a good choice for your company and its creditors.

    In a Creditors Voluntary Liquidation, your company’s creditors will typically be able to recover some of the cash they’re owed, through the sale of assets that were owned by your business.

    Your company’s directors also benefit from a significantly reduced risk of wrongful trading charges, which are more common in compulsory liquidation and can lead to restrictions on your directorship of companies in the future.

     

    Contact us to learn more about Creditors Voluntary Liquidation

    If your company is struggling with cash flow and just doesn’t have a viable business model, the Creditors Voluntary Liquidation process could provide a good end to its trading life, for its creditors and company directors.

    Our business recovery experts have provided advice and assistance to hundreds of UK companies. Contact us now to learn about the CVL process and discover if it’s a suitable choice for your company.