Creditors Voluntary Liquidation (CVL)
If the company is experiencing financial difficulty and there is no prospect of continuing to trade then you should consider using a CVL procedure to wind down its affairs
We can guide you every step of the way through what can be a difficult and stressful period
A very quick, cost effective way of formally closing down a company and complying with your duties as a director
Protect yourself from legal action by taking professional advice and initiating the CVL process
What is a CVL?
A CVL is a formal process for voluntarily winding up a company when it is insolvent (defined by insolvency legislation as when a company cannot pay its debts as and when they fall due or where its liabilities exceed its assets).
When is a CVL appropriate?
This procedure is only appropriate if your company is insolvent. For example if:
- Its liabilities exceed its assets and/or
- It cannot pay its debts as when they fall due and
- There is no prospect of the company continuing to trade
Process for CVL
The liquidation process is started by the directors. At a board meeting they pass a resolution that the company is insolvent and instruct an insolvency practitioner’s firm to assist the directors with the steps required to place the company into CVL.
The steps will include the convening of the required meeting of shareholders and a decision procedure for creditors.
Meeting of shareholders
A meeting of shareholders is held pursuant to section 84 of the Insolvency Act 1986. The meeting considers a special resolution that the company cannot, by reason of its liabilities exceeding its assets, continue its business and that it is advisable to wind up. The special resolution requires a majority of 75% of those present and voting in person or by proxy. The shareholders also nominate a liquidator. This requires an ordinary resolution passed by a simple majority of more than 50% of those present and voting.
Where there is a holder of a qualifying floating charge, before a company passes a resolution for voluntary winding up, it must receive notice of 5 working days.
Decision Procedure for Creditors
Following the meeting of shareholders, the creditors are given the opportunity to consider the appointment of an insolvency practitioner either by a deemed consent procedure or by holding a virtual meeting of creditors.
Creditors will be sent a notice detailing the resolution to appoint the liquidator together with a copy of the Statement of Affairs of the company. The creditors will be advised of the day on which the resolution will deemed to be passed (this will usually be the day of the members meeting). The notice must be delivered to creditors 3 business days before the date the resolutions are deemed to be passed. Best practice determines that two weeks’ notice is normally provided to creditors. The creditors will be informed that they have the right to object to the deemed consent. If creditors object then a physical meeting will need to be called to seek a decision from creditors on the nomination of a liquidator. If creditors do not object then the resolution is deemed passed.
Virtual Meeting of creditors
The virtual meeting is usually held on the same day as the shareholders’ meeting. The purpose of this virtual meeting is to nominate a liquidator and a committee. If, however, a committee is not formed the creditors will also be asked to approve resolutions relating to fees.
Directors often rely upon professional advisers when making the decision to wind up and the steps to be followed once the decision has been made.
Notice of the virtual meeting of creditors together with the Statement of Affairs of the company is delivered to creditors not less than three business days’ before the virtual meeting is held. Best practice determines that two weeks’ notice is normally provided to creditors. The notice of the creditors’ virtual meeting is advertised in the London Gazette and, if thought necessary, in a local newspaper. The creditors will be informed that they have the right to object to the virtual meeting. If creditors object then a physical meeting will need to be called.
In the event that objections are received by creditors about either the deemed consent procedure or the virtual meeting it will be necessary for a physical meeting to be called.
Once the criteria to call a physical meeting has been met then a physical meeting of creditors needs to be held within 14 days. The notice calling the physical meeting must be delivered at least 3 business days before a meeting may be held. The notice of the creditors’ meeting is advertised in the London Gazette and, if thought necessary, in a local newspaper.
Action to be taken between the calling of shareholders meeting/notice of decision procedure and the appointment of a liquidator.
Once the decision has been made to wind up the company, it would normally cease to trade. The directors retain their powers of management and have certain statutory obligations. These obligations include the preparation of a statement of affairs, which must be signed as a Statement of Truth by some, or all, of the directors. The statement is sent to creditors in advance of the deemed consent procedure or the virtual meeting and is lodged at Companies House. The directors will be requested to provide information on the company’s history and trading, including reasons for the deficiency shown on the statement of affairs.
Payment for this work is made from the company’s assets if funds permit. If no funds are available the directors, or a third party would be expected to pay these costs.
Once the Liquidation appointment has been made
- Notify all relevant parties about the liquidation appointment
- Communicate with all creditors from start to finish
- Instruct agents to collect and safeguard any assets that may be at risk
- Realise all company assets including book debts
- Assist employees in submitting their potential claims to the Redundancy Payments Service
- Submit a report to the Secretary of State for Business Innovation and Skill on the conduct of directors
- Deal with any company pension scheme
- Agree creditors’ claims and make distributions to creditors
- Prepare all statutory reports and take steps to close down the liquidation in a timely fashion
- Deal with all paperwork relating to the Company
Umbrella’s team of experts have a broad range of experience in commercial liquidations. For a free and strictly confidential consultation contact a member of the team. Call: 0800 611 8888 or email us.
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What our customers say
Before I came to Umbrella.UK Insolvency I was in a bad place mentally due to debt because I believed I would be in my current situation for a long time to come. Umbrella Insolvency walked me through my options and helped me pick the best one. I am genuinely amazed at what they managed to do for me and can now afford to live comfortably, and without the constant worry of debt looming over me.
First of all, I would like to say a BIG Thank You for all of your assistance over the past year. I would not be in the positive state of recovery without Umbrella Insolvency. Your care and assistance at the application stage last summer, along with the advice throughout the year, has been great. I would not hesitate to tell anyone in my negative situation where to turn to.
Following a personal recommendation, we appointed Umbrella.UK Insolvency to handle the voluntary liquidation of our business (MVL). Tom and his team were excellent, keeping us well informed throughout and working effectively with the company's accountants to ensure all documentation was produced and filed on time. I have since recommended Umbrella.UK to friends looking for similar services and I have no hesitation in recommending them more widely.
I extend my appreciation of your professional efficiency in handling my company business and herewith say thank you.
Thank you so much for your help with my IVA. As an ex-company Director my life took a downward spiral when creditors from my liquidated company called upon my personal guarantees. I had been treading water for months, ran up credit card debts and borrowed from family. When a creditor instigated bankruptcy proceedings against me I thought I was going to lose my house. I contacted Umbrella.UK Insolvency who stopped all the phone calls and threatening letters. Umbrella Insolvency explained things in a way I could understand. They negotiated with creditors and my IVA went through, now I can sleep at night again and I kept my home. Thomas Fox was extremely knowledgeable and I truly thank him and his team.
I'd just like to thank both you and Tom for your help with the closure of my company. You have been highly efficient and very professional throughout. Thank you.
Umbrella Insolvency guided me as sole Director of my small limited company, and the shareholders, through every step of a Members Voluntary Liquidation in a very efficient manner. The steps required were clearly laid out and proactively managed by their licensed practitioner. From first meeting through to an interim distribution of funds to shareholders took only a few days in our case. Thereafter, Umbrella will be managing all of the downstream actions required to complete the process with HMRC and Companies House, through to the final discharge of the company.
I engaged Umbrella .UK Insolvency to oversee a Members Voluntary Liquidation for the small consultancy business I've been running. The team talked me through the MVL process, steps and requirements. The paperwork involved was well explained and straightforward, with the initial disbursement of funds handled very quickly and professionally under tight deadlines.
*We don’t charge for an initial consultation, but it may lead to an insolvency solution where our pre-appointment costs are reimbursed as part of the fee structure that creditors approve.