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Creditors Voluntary Liquidation

Our team has years of expertise in dealing with liquidation.  We make a difficult process as worry-free as possible and secure the best possible financial outcome.

If you are thinking of closing a limited company with debts then a Creditors’ Voluntary Liquidation (CVL) is likely to be the best course of action.

A CVL could be the best solution if you don’t want to keep your business running due to cash flow problems or pressure from creditors.

If you fear your limited company is failing due to debts becoming unmanageable, then liquidation may be a way of restarting your business and clearing any outstanding debts, getting rid of a poor reputation and easing unhealthy relationships with creditors.

We understand how it can feel as a company director faced with mounting debts and the feeling there is no way out. However, there is the potential for a positive future too.

Liquidating a company is not something to be taken lightly, so it’s important to understand the different types of liquidation, the overall process, and how you can get started.

Our team has years of expertise in dealing with liquidation and can make a difficult process as stress-free as possible while securing the best possible financial outcome.

The Future Strategy liquidation process minimises worry. We will:

  • Appoint an experienced Insolvency Practitioner (IP) to work on your case.
  • Explain the process fully, keep you properly informed throughout and be easily accessible.
  • Leave you with a clean slate to start again – with unsecured debt wiped away with the liquidation of the company.

If you would like to know more about the possibility of liquidating your company, please contact the Future Strategy team today for a free and confidential initial consultation.

We will assess the viability of the business and offer advice on appropriate strategies.

We will also give advice on the solution options available in relation to your specific situation and requirements. These solutions are wide-ranging, cost-effective, and flexible.

Why choose a creditors voluntary liquidation?

In some cases, a business will be beyond rescue and the best, and perhaps only way forward is liquidation. This allows the directors to move on, and creditors to recover as much money as possible.

A CVL effectively closes the company and deals with all debts.

The idea of liquidation probably feels like a big step. After all, you’ve worked hard to get your business up and running, and now you’re looking to close it.

If you’re thinking about liquidating your business, these are the reasons why it could be right for you:

  • When your business is long-term insolvent (i.e. it can’t pay its debts).
  • When you have no realistic way to repay creditors.
  • When you’re looking to start another company debt-free as part of a recovery procedure.

Often our clients worry about the implications of liquidation and the impact it may have future ventures. In fact, the opposite is true – liquidation often marks the start of something new rather than an end:

  • You’re able to start again with a clean slate.
  • It doesn’t mean you have to give up on business. Indeed, for many directors, it can be the start of something new and exciting.
  • You aren’t liable for any unsecured debt; even tax debts that are owed solely by the company die with it.
  • You’re usually able to buy the assets of the company out of liquidation.

Advantages of a creditors voluntary liquidation

The most common reason why most directors choose to liquidate the company is to avoid the hassle of being accused of wrongful trading. Liquidating a company shows directors are acting in the best interests of the company’s creditors. 

Taking the initiative to voluntarily wind up your company through a CVL will also save you the complication of having to deal with the process of being forced to liquidate because of a court petition.

But perhaps the biggest advantage is peace of mind. Voluntarily liquidating your company will give you the assurance that the troublesome business is finished, leaving you to concentrate on the future.

When we liquidate your company, it means you no longer have to deal with pressure from creditors the business owes, debt collectors and HMRC. You can essentially start again with a clean slate.

When to consider a creditors voluntary liquidation

One of the first factors to consider is if your company is actually insolvent or not. The basic question to answer is: “can I pay the bills when they are due?”

If the answer to that is ‘yes’, then you aren’t insolvent. If you still want to look at closing your company, then you’ll need a solvent liquidation (Members Voluntary Liquidation) or dissolution.

If the answer is ‘no’, then your business could well be considered to be insolvent, which means your responsibilities as a director change.

You should also consider if your cash flow problem is long-term. If it’s just temporary, then liquidation may not be the best solution. A Company Voluntary Arrangement (CVA) or an informal agreement with your creditors would probably be a better solution.

The Future Strategy team can help you decide which of these options is best for you with our free initial consultation – simply request a quote to find out more.

What does a creditors voluntary liquidation involve?

If you are considering taking this route, there are a number of restrictions you need to consider.

A CVL could be the only course of action if a company doesn’t have enough money to pay all its debts. It is one of the most common ways for directors and shareholders to deal voluntarily with insolvency.

A CVL is normally started by directors, who agree to convene meetings of shareholders and creditors and discuss placing the company into liquidation.

Once this course of action has been agreed upon, we can help deal with the CVL.

It’s important to note that a liquidation can only be carried out by a licensed Insolvency Practitioner (Liquidator). At Future Strategy, we provide a fully qualified Liquidator to oversee the entire process and identify any potential problems early, resolving them as soon as possible.

Once appointed, the Insolvency Practitioner (IP) has three main objectives:

  • To realise the assets of the company.
  • To agree on claims of creditors of the company.
  • To investigate the affairs of the company and the directors’ conduct.

A CVL is appropriate when the company is deemed to be insolvent and when it does not appear to be viable, even after restructuring.

How much is a limited company liquidation?

A liquidation usually costs somewhere between £2,500 and £5,000 (plus VAT), and disbursements, though in a lot of cases the director will pay nothing.

Liquidating a company is funded by the sale of any assets, though if there are no assets, then administrative dissolution may be a better option.

If liquidation is necessary, it may even be funded by a redundancy claim.

If you do meet the criteria, claims can be made from the National Insurance Fund via the Redundancy Payments Service (RPS), and any redundancy payments are tax-free. If you are able to make a claim, our experts are on hand to help.

Can you make a claim for directors’ redundancy?

If you are a director of a limited company that’s been trading for more than two years, and you’re considering closing it down due to financial struggles (i.e. HMRC debts, creditor pressure, cash flow worries, potential insolvency), it’s likely that you can claim for a director redundancy payment.

The average claim in the UK is £12,000. This money can be used for liquidation costs if necessary. It’s also likely that you can claim for other statutory entitlements such as notice pay, holiday pay and unpaid wages.

If you do meet the criteria, claims can be made from the National Insurance Fund via the Redundancy Payments Service (RPS), and any redundancy payments are tax-free. If you are able to make a claim, our experts are on hand to help.

What happens after the CVL?

The company is struck off the register held at Companies House and no longer exists. Any liabilities still unpaid will be written off unless they were personally guaranteed.

We can talk you through all of your options and find you the right solution

We're always here to help.

For free, immediate and confidential advice about closing a company, please contact us.