If a company is insolvent, has no prospect of trading on or restructuring its affairs and consequently has no prospect of avoiding liquidation, a creditors’ voluntary liquidation (or CVL) can be initiated by the company directors.
This is where the shareholders, usually at the directors’ request, decide to put a company into liquidation. Initially the shareholders will pass a board resolution to wind-up the company and thereafter the directors will appoint a licensed Insolvency Practitioner to take control of liquidating the company. A creditors’ meeting will be convened at which a director must be present along with the proposed liquidator. The creditors can confirm the appointment of the proposed liquidator but may also suggest an alternative liquidator.
A CVL is the most common way for directors and shareholders to deal voluntarily with their company’s insolvency.
When to consider CVL
Where the company is insolvent and has ceased to trade and has assets available to distribute to creditors, a CVL is usually the most appropriate process for this purpose. The directors have some initial control on the choice of Insolvency practitioner who will commence the winding-up process but the creditors can appoint an alternative Insolvency Practitioner to act as liquidator if they so wish.
For further information on Creditors Voluntary Liquidation (CVL) advice for your company, contact us today at an office near you.