Company Insolvency – Creditors’ Voluntary Liquidation (CVL)
Closing down an insolvent company
When the owners or directors want to close down an insolvent company, the procedure is known as a Creditors’ Voluntary Liquidation or CVL.
When a company can no longer pay its debts as they are demanded, its directors are under an obligation to take all possible steps to minimise the losses suffered by its creditors which in most cases means closing down the business and putting the company into liquidation. Otherwise they run the risk of prosecution for wrongful trading.
Creditors’ Voluntary Liquidation (CVL) or cash flow problem?
So once it is clear that the situation is not just a short term cash flow problem, which can be rectified by securing new borrowing facilities, introducing new capital or by earning sufficient future profits, the directors must act swiftly to commence the voluntary liquidation procedure (CVL).
This will lead to the appointment by the creditors of a liquidator who will sell the assets and distribute any funds left after costs in accordance with a strict order of priority laid down by insolvency legislation. Although the choice of the liquidator lies with the creditors, the directors can nominate a licensed insolvency practitioner to assist with starting the CVL process and who is likely to become the liquidator in due course.
Opus has a number of highly experienced licensed insolvency practitioners who have carried out many hundreds of CVLs. An initial meeting to assess the situation and discuss the options can be arranged free of charge.