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Company Voluntary Liquidation (CVL) Explained: Step-by-Step Guide
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Free Guide: Directors guide to liquidation the correct way
If you are a director and considering closing your company by liquidation or insolvency, you must read our free guide to discovering how to do it the right way. Simply click the button below and enter your details below to receive this free guide now:
When to Consider a CVL for Your Business?
A company should enter liquidation if it fails the Cash Flow Test (cannot pay debts as they fall due) or the Balance Sheet Test (liabilities exceed assets). Common warning signs include HMRC arrears (VAT, PAYE), creditor threats, or persistent losses.
Taking action early through a CVL demonstrates responsible conduct and avoids the higher costs and risks associated with compulsory liquidation.
The CVL Process and your director responsibilities
The process is straightforward: following an initial consultation, directors pass a board resolution, and shareholders vote to wind up the company. A licensed Insolvency Practitioner is appointed to realize assets and distribute funds to creditors.
Throughout this, directors must fulfill strict legal duties under the Insolvency Act 1986 to avoid risks like wrongful trading or personal contribution claims.
Our focus is on you, the director - not your creditors.
We completely understand the emotional anguish company directors like you face when considering the future of your company – and the knock-on impact this can have on your personal life.
Our expert team will outline all of your options in a jargon-free, easy-to-understand way and advise you and your business on the best route forward – with the goal of protecting you and your personal assets.
Contact us for a confidential, no-obligation conversation.
CVL - Frequently Asked Questions
A CVL is a formal insolvency procedure under the Insolvency Act 1986. It allows directors of an insolvent company to voluntarily shut down the business, appoint a liquidator, and ensure that assets are distributed to creditors fairly.
In most cases, no—a limited company is a separate legal entity. However, you may be personally liable if:
You have signed Personal Guarantees (PGs) for leases or loans.
You have an Overdrawn Director’s Loan Account (DLA).
The liquidator finds evidence of Wrongful Trading or Preferences (paying one creditor over another).
Yes, directors are usually free to start a new company immediately, provided they have not been disqualified and follow naming rules under Section 216.
The cost depends on the complexity of the case and the value of the company’s assets. In many cases, the fees are paid directly from the sale of company assets. We provide a clear, fixed-fee quote following your initial consultation.
You can typically place a company into liquidation within 1–3 weeks. The full administration and asset realization usually take 6–12 months, while the final closure and dissolution can take up to 24 months depending on complexity.
Employees are usually made redundant. They can claim unpaid wages, holiday pay, and redundancy pay from the government’s Redundancy Payments Service (RPS), provided they have the necessary length of service.
Yes. A Bounce Back Loan is an unsecured business debt. As long as the loan was used for the economic benefit of the business and not for personal gain, it can be included in the CVL like any other trade debt.
Since December 2020, HMRC has “Secondary Preferential” status for taxes held “in trust,” such as VAT, PAYE, and CIS. This means they are paid before floating charge holders and unsecured creditors. Our practitioners will explain how this impacts your specific asset distribution.
Section 216 of the Insolvency Act prevents directors of a liquidated company from using the same or a similar “prohibited name” for a new company for five years. There are specific exceptions, and we can advise you on how to restart legally.
Generally, no. Because the company is a separate entity, a CVL does not appear on your personal credit file. Your credit is only affected if a creditor enforces a Personal Guarantee or if you are a sole trader.
Waiting for a creditor (like HMRC) to force your company into Compulsory Liquidation is risky. It is more expensive, offers you zero control over who the liquidator is, and involves a much more public and rigorous investigation into your conduct as a director.