WHERE TO BEGIN.
If your limited company is insolvent, then you are able to apply for a Creditors’ Voluntary Liquidation (CVL). However, before deciding on any possible course of action, we strongly advise you to contact our experts at 1st Business Rescue. We will be able to consider your company’s specific circumstances and advise you whether a CVL would be the most appropriate course of action. If liquidation is indeed the best way forward for your business and you wish to engage us, we will then begin the process.
What exactly is a CVL?
A CVL is a formal insolvency process that is used to close down insolvent companies. Unlike a compulsory liquidation, a CVL is instigated voluntarily by a company’s directors and shareholders. Whereas, in a compulsory liquidation, a company’s creditors apply for the liquidation. It is illegal to strike off a limited company with outstanding debts, so if you want to close your insolvent business, then a CVL is likely to be your best course of action, particularly because you will have more control over the company’s closure, rather than waiting for the creditors to issue a winding-up petition.
How do I apply for a CVL?
1. Shareholders’ meeting.
Before the liquidation can proceed, a meeting must be conducted with the company’s shareholders. 75% of the shareholders must agree to the winding-up resolution before the liquidation is proposed to the company’s creditors.
2. Creditors’ meeting.
Before any formal engagement, the insolvency practitioner becomes the proposed liquidator. You must supply the liquidator with a full list of the company’s creditors, so that the liquidator may deal with them on your behalf. A creditors’ meeting will then be arranged. These meetings are often held virtually but creditors can request a physical meeting.
3. Appointing the liquidator.
Once the company’s creditors have approved the liquidator, they will begin the formal liquidation process. The company will cease trading, any company assets will be realised, employees will be made redundant, and, funds permitting, distributions will be made appropriately to the creditors. Investigations into the directors’ conduct will also be carried out in due course. It’s important to note that directors will no longer have control of the company or its assets from this point, and they are no longer able to act on behalf of the company.
If you think that your company is on the brink of insolvency or is already insolvent, please get in touch with the experts at 1st Business Rescue. With years of experience, we will be able to discuss the best course of action for your business and for you as a director.