Where to begin
A Creditors’ Voluntary Liquidation, or CVL, is a process a company can enter into by choice when they are facing insolvency. The sooner they enter into it, the better, as an insolvency practitioner’s services will be employed and will ensure any risks to the business or directors are mitigated.
It follows a formal process that will include an investigation into how the directors have conducted themselves and allow assets to be realised to pay off debts. Any further outstanding debts will be dissolved once the business has been closed in full.
Employed directors and other staff will be eligible for redundancy payments and providing there has been no misconduct or personal guarantees signed or Director’s Loan Accounts utilised, directors will not be personally liable for the financial situation of the business.
The costs associated with liquidating a company can vary, so let’s take a look in some more detail.
The costs associated with a CVL
CVL will have various fees associated with it, dependent on the company’s individual circumstances. Factors such as how many shareholders it has, the levels of debt, and the value of the assets held will all play a significant part. As such, it is extremely difficult to give projected costs without first having some understanding of the business itself.
In order to go through a formal CVL, it is beneficial to appoint an insolvency practitioner who offers expert advice and is licensed and regulated. 1st Business Rescue is well-placed to help guide your business through a CVL if one is required by placing you with one of the licensed insolvency practitioners that we work with.
How does a company pay for a CVL?
The company can fund a CVL in different ways, including:
- Personal funding – the directors may choose to pay for it themselves via their own means. However, this is usually a last resort as assets from the business would otherwise be used.
- Redundancy pay – any redundancy payment owed to the directors can be used to pay for the CVL. For the directors to qualify for redundancy pay, they must have been employed by the business for over two years, have worked more than 16 hours a week and receive a monthly wage.
- Selling company assets – insolvency might not necessarily equate to no assets, so if yours are adequate, the realisation of some of them could be enough to fund the CVL. This means that via the liquidation process, everything will be covered.
The voluntary process of a CVL allows directors to maintain more control over the company’s liquidation than they otherwise might do. Get in touch with us and we will conduct an assessment to see how much your CVL is likely to cost and discuss the different options of how to pay for it.