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Creditors' Voluntary Liquidation: Important Points to Consider

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One of the big issues when entering into a voluntary liquidation of your company is whether or not it is solvent at the time when the directors meet to vote on a resolution to liquidate. It is a criminal act to knowingly declare your company solvent if there is no way to pay all your creditors and assorted outstanding debts such as payroll and taxes within a 12 month period after the liquidation resolution. If your company is insolvent you must file a Creditors' Voluntary Liquidation (CVL) rather than a Members' Voluntary Liquidation (MVL) which is for solvent companies.

Unlike a Creditor's Voluntary Arrangement, sometimes called a Creditors' Voluntary Agreement, a CVL is part of the Creditors' Winding Up process through which a business is liquidated. It is a process that transpires over a 12 month period and is overseen by a liquidator (Insolvency Practitioner) which may be nominated by the directors of the company, but will always be the final choice selected by the creditors who may nominate someone totally different. That's the point of a Creditors' Voluntary Winding Up, after all, in that the company is declaring itself insolvent so the liquidator chosen must see to as many of those debts being paid as possible.

The Creditors' Voluntary Liquidation procedure must follow strict guidelines, beginning with a meeting of the board of directors of the company in question. From there, it is important to understand how, where and when the directors' resolution is posted in the papers and filed with the UK Companies House. There are separate rules regulating the various countries in the UK. England and Wales follow one set of guidelines whilst Scotland has its own regulations as does Northern Ireland. One thing, however, is common to all countries. It is important to utilise the services of a professional Insolvency Practitioner so that all laws will be adhered to.

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