Insolvency
Creditors’ Voluntary Liquidation
Clear, practical guidance for directors considering a CVL.
Understanding CVL
What is a Creditors’ Voluntary Liquidation?
A Creditors’ Voluntary Liquidation (CVL) is a formal insolvency procedure used when a company cannot pay its debts and there is no realistic prospect of recovery. It enables directors to close the company in an orderly way, with a licensed insolvency practitioner appointed to manage the process.
The liquidator takes control of the company, realises its assets and distributes any available funds to creditors in accordance with insolvency law. A CVL is often the appropriate route where continued trading would worsen the position for creditors.
How does the process work?
The process is managed by a licensed insolvency practitioner and follows a clear sequence.
01
Initial advice
Directors obtain advice on the company’s financial position and whether a CVL is appropriate.
02
Appoint a practitioner
A licensed insolvency practitioner is appointed to assist with the formal steps and act as liquidator.
A CVL provides a structured way to bring an insolvent company to a close.
03
Creditor decision
Creditors are notified and the liquidation is formally placed into effect.
04
Liquidation
The liquidator realises assets, deals with claims and completes the company’s affairs.
Director responsibilities
What does this mean for directors?
Directors must act in the best interests of creditors once they know, or ought to know, that the company is insolvent. This includes taking advice promptly and avoiding actions that could worsen creditors’ position.
Stop worsening losses
Protect company records
Cooperate with the liquidator
Take timely advice
