What is Creditors’ Voluntary Liquidation?
Creditors’ Voluntary Liquidation is a formal debt process that insolvent companies can enter into if they have unmanageable debt levels and the company is no longer viable as a trading entity. It involves selling business assets to repay creditors, before closing the company down in an orderly manner.
Scotland Debt Solutions helps businesses in Scotland to deal with debt. We can help you determine whether Creditors’ Voluntary Liquidation is the right process for your company using our extensive professional experience and technical knowledge.
So how does CVL work, and why might this process be a good option?
How does CVL work?
Directors take the decision to place their company into Creditors’ Voluntary Liquidation, but must obtain a majority vote of 75% of shareholders (by value of shares). A liquidator is appointed and creditors informed of the situation.
Assets are sold and the proceeds distributed to creditors in the statutory order of priority. The company is then removed from the Companies House register and closed down permanently.
Why might you choose to enter Creditors’ Voluntary Liquidation?
We can help you deal with the following situations and more, and let you know whether CVL is your best option:
A creditor has issued a winding-up petition
When a creditor issues a winding-up petition they’re trying to force you into liquidation. A CVL is preferable to compulsory liquidation as you have more control over the process, and can appoint your own choice of liquidator in Scotland.
A Time to Pay (TTP) arrangement has failed
When a Time to Pay arrangement fails, HMRC typically take quick action to force the company into liquidation – as with any other creditor this is done via a winding-up petition.
You want to avoid wrongful trading
Creditors’ Voluntary Liquidation helps you and other directors meet your legal duties and avoid wrongful trading by putting creditors first. Wrongful trading can easily happen if you’re not fully aware of your company’s financial position or don’t understand why you need to cease trading. By appointing an insolvency practitioner you are demonstrating your desire to place your creditors interests above your own.
You’re concerned about personal liability
You can be held personally liable for some or a proportion of the company’s debts if you’re found guilty of wrongful trading or other forms of misconduct, as well as being disqualified from office.
Even though the liquidation process means the end for your business, Creditors’ Voluntary Liquidation does offer some benefits.
What are the advantages of CVL?
- Directors have more control over the process than with compulsory liquidation
- CVL helps protect the position of your creditors
- You may be able to claim director redundancy
What are the disadvantages of Creditors’ Voluntary Liquidation?
- CVL is publicly advertised in the Gazette
- Your actions as director are investigated by the liquidator
- If you’ve provided a personal guarantee for a business loan you’ll be personally liable for the outstanding amount.
How can Scotland Debt Solutions help?
Our team at Scotland Debt Solutions specialises in helping Scottish companies deal with debt, and has extensive experience of Creditors’ Voluntary Liquidation. We can help you establish whether CVL is your best option, or whether other choices are available.
We’ll help you through the next step and provide trustworthy guidance at each stage of the process. Operating a network of offices around Scotland means you’re never far away from the support you need, and you can also take advantage of a free same-day consultation to quickly determine your company’s financial position.
