CREDITORS VOLUNTARY LIQUIDATION ADVICE

The Creditors Voluntary Liquidation procedure will usually begin with a consultation with an experienced insolvency practitioner. During this meeting, your company’s financial situation will be carefully assessed. This means diligently reviewing your existing liabilities, assets, cash flow, and more. 

The goal of an initial consultation is to provide you, as the company director, with a clear understanding of which option is best suited to your situation. If a CVL is not the most appropriate course of action, it will outline alternative solutions that would better suit your needs.

If a CVL is seen to be the best option available, the company’s directors are required to pass a formal resolution to voluntarily wind up their business. This marks the official beginning of the liquidation process and is immediately followed by trading ceasing immediately, excepting any activities directly relating to the winding-up process. 

Within 14 days of the director(s) passing the resolution to wind up, the company’s creditors must be notified and convened. A meeting of creditors is a key part of the Creditors Voluntary Liquidation procedure — with seven days’ notice of the meeting being provided to ensure as many creditors will be able to attend as possible. 

At the meeting, all creditors will be informed of the business’s financial position and of the ultimate decision to voluntarily liquidate. It is at this stage that directors are tasked with presenting a comprehensive statement of the firm’s finances, including details of assets, outstanding liabilities, and what led to the financial troubles and insolvency. This is the part of the process where creditors are afforded the opportunity to ask any questions they might have, and seek additional clarification should it be needed. 

It is also at this meeting that a vote will be taken on the appointment of the proposed liquidator. If parties agree, the insolvency practitioner selected by the directors will be appointed. However, if this proposal is rejected, an alternative can also be voted for. The liquidator appointed will be responsible for taking over the management of the process from here on out.

Once appointed, the primary role of the liquidator is to realise (sell) the company’s assets in order to generate the necessary funds that will be distributed to the creditors. Assets that will be realised include tangibles, such as stock, equipment, vehicles, and premises; as well as intangible assets like intellectual property.

As mentioned above, any proceeds generated from the asset sales are then immediately distributed to the different types of company creditors’, as per the order of priority. This means that, generally, secured creditors will be paid first, followed by priority creditors, and, last of all, unsecured creditors. Any funds left over from the asset sales once creditors have received what is owed can then, and only then, be distributed to shareholders.