If directors of a company believe it to be insolvent, they have a duty to ensure that the financial position does not worsen. If there is no prospect of rescuing the business, either under an insolvency procedure or otherwise, then a Creditors’ Voluntary Liquidation (CVL) may be appropriate.

This usually involves the closure of the business and a sale of its assets. Directors and shareholders have the power to appoint an Insolvency Practitioner of their choice to act as Liquidator, although this will be subject to the approval of the company's creditors.

If directors or shareholders do not voluntarily take steps to place an insolvent company into liquidation, it may be wound up by one or more of its creditors through a Court process. This is known as a Compulsory Liquidation. In this instance a government civil servant, the Official Receiver, will initially deal with the Liquidation. If the company has assets over a certain value a private sector Insolvency Practitioner will be appointed.

Advantages of Creditors Voluntary Liquidation

1. “Voluntary” reflects the fact that the directors have chosen to close the company and have chosen their own liquidator, as opposed to the company being forced into “Compulsory” liquidation by an aggressive creditor.
   
   
2. The directors have an accessible and professional point of contact for advice and support.
   
   
3. It may be possible to acquire assets and continue to trade via a new company. This is unlikely to be possible in a Compulsory Liquidation.
   

How we can assist you in placing your company into Creditors Voluntary Liquidation (CVL)

• We can manage the entire liquidation process from start to finish.
  
  
• We can advise you in relation to restarting and assist with the necessary compliance.
  
  
• We can make the whole experience as painless as possible.
  

Should a Creditors Voluntary Liquidation (CVL) not be possible the company may be forced into Compulsory Liquidation. This is preceded by the company receiving a formal Winding-up Petition, usually served at the company’s registered office.

If you receive a Winding-up Petition, please contact us immediately, and before the petition is advertised. Upon advertisement the company’s bank accounts will be frozen, suppliers may refuse to supply and other creditors may support the petition. Swift action is essential if the business or any part of it is to be salvaged. If no action is taken the court will make a winding up order and the company placed into Compulsory Liquidation.

A comprehensive and independent source of information detailing the Compulsory Liquidation (CVL) process, the role of the Official Receiver, and directors’ responsibilities is contained within the Insolvency Service publication “A Guide for Directors”. Here is the link:

http://www.bis.gov.uk/assets/insolvency/docs/publication-pdfs/11-1016-guide-for-directors.pdf

Please contact us for further advice.

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