What is Creditors’ Voluntary Liquidation (CVL)?

A Creditors’ Voluntary Liquidation (CVL) is a formal insolvency process used to close an insolvent company that can no longer pay its debts. If your company is under pressure from HMRC, suppliers or other creditors and there is no realistic prospect of recovery, a CVL may be the appropriate way to close the company properly.

Worried your company cannot pay its debts? Call DCA Business Recovery on 01702 344558 for a free, confidential initial discussion.

The cost of a Creditors’ Voluntary Liquidation will depend on the company’s circumstances and the amount of work involved. Read our guide on How Much Does It Cost to Liquidate a Company?, including the factors that affect the fee and the available funding options.

Creditors’ Voluntary Liquidation

When Should You Consider a CVL?

A Creditors’ Voluntary Liquidation may be appropriate if:

  • Your company can no longer pay its debts as they fall due.
  • HMRC arrears, such as VAT or PAYE, are increasing.
  • Creditors are chasing for payment the company cannot afford.
  • Cash-flow problems cannot realistically be resolved.
  • The company has received a winding-up threat or petition.
  • The business has stopped trading or is about to cease.
  • There is no realistic prospect of rescuing the company.

Many companies entering liquidation also have an outstanding Bounce Back Loan. This does not usually prevent a company from entering a CVL, but the liquidator will review how the loan was obtained and how the funds were used.

The CVL Process

Director Decision

Directors must hold a board meeting to agree that the company is insolvent and should enter liquidation.

Insolvency Practitioner Appointment

A licensed insolvency practitioner is appointed to guide the company through the process and, once appointed as liquidator, takes control of the company’s affairs.

Shareholder Resolution and Creditor Decision Procedure

Shareholders pass a special resolution to place the company into liquidation. At least 75% of the votes cast must support the resolution.

Creditors are then invited to participate in a decision procedure relating to the appointment of the liquidator.

Liquidation Process

The appointed IP takes control of the company, realising assets, dealing with creditors, and distributing any remaining funds.

What Happens to Directors?

Once the liquidator is appointed, the directors’ executive powers largely cease, although they must continue to cooperate with the liquidator and provide information about the company’s affairs.

Will I Be Personally Liable in a CVL?

A limited company is normally a separate legal entity, so directors do not automatically become responsible for all company debts when it enters liquidation.

However, personal issues can arise where there are matters such as personal guarantees, overdrawn director’s loan accounts or concerns about transactions and director conduct.

These issues should be reviewed separately as part of the insolvency advice.

Personal Guarantees and Company Liquidation

Overdrawn Director’s Loan Account in Liquidation

Employee Rights in a CVL

Employees may be able to claim redundancy pay, outstanding wages, pay in lieu of notice and holiday pay from the Redundancy Payments Service (RPS). We can guide you on how employees should submit their claims.

Why Choose DCA Business Recovery?

At DCA Business Recovery, we understand how challenging this decision can be. Our experienced team will provide clear, practical advice tailored to your company’s circumstances. We will guide you through the CVL process with empathy and professionalism, ensuring you understand your options every step of the way.

If your company is facing financial distress, contact us today for a confidential consultation to discuss the best course of action for your business.

Further Guidance

For additional support, explore our FAQs for quick answers to common questions about Creditors’ Voluntary Liquidation. You can also download our PDF guides for clear, practical guidance on each step of the CVL process. These resources are designed to help you make informed decisions and efficiently wind up your insolvent company with confidence.

Guides

Download PDF guides with clear, practical advice on managing a Creditors’ Voluntary Liquidation, including compliance requirements and the key steps involved in efficiently winding up an insolvent company.

Frequently Asked Questions

The process is relatively straight forward and commences with a meeting of the board of directors. Notice is then sent to shareholders of the company and to creditors of a meeting to place the company into liquidation.

A shareholders meeting is held for the shareholders to agree to place the company into liquidation, followed swiftly by a creditors decision procedure; a meeting of creditors held virtually for creditors to attend or via deemed consent.

This process is covered in our initial meeting.

Yes. A director is nominated to chair both meetings and will be required to attend our offices on the chosen date.

There are two resolutions passed at the shareholders meeting; one to place the company into liquidation which requires 50% of shareholders to agree and a second resolution to appoint a liquidator which requires 50% of shareholders to agree.

Creditors cannot oppose the liquidation, but they are able to put forward their own nomination for liquidator if they have the required values for voting.

Generally to place a company into liquidation will take a minimum of 14 days from instruction and receipt of the relevant paperwork.

Employees can claim arrears of wages, pay in lieu of notice, holiday pay, arrears of pension contributions and redundancy from The Redundancy payments Office. We offer guidance and support to employees as part of our fee.

An agent will be instructed to value the assets. Should any interested parties become known we will inform the agent and discussions will be held between the agent and those parties.

Yes. There are certain restrictions on the re use of company names, which forms part of our initial advice meeting.

If you have taken a bounce back loan there are no personal guarantees. However, if you have misused Bounce Back Loan funds you may be held personally liable for the balance of the loan or for any payments which are deemed not business expenses.

There are also implications where the amount of the loan obtained was more than the company was entitled to.

Precise, fair, reasonable and clear, you are in good hands.

Mark

Amazing company. Luke and team were friendly and helpful. Always available and working really hard. Highly recommend

Sean
I know Debbie and Luke Cockerton very well. They are my favourite insolvency people mainly because they actually help my clients rather than just bayonetting the wounded and stealing their gold teeth as some insolvency people seem to do.
Accountant Contact
My accountant referred me to DCA when I was presented with a large PAYE demand from HMRC.

I tried to arrange a payment plan with them and I was unable to do so.

Luke had a meeting with me and my partner and discussed the options available and before we put the company into liquidation.

Anonymous

I found Luke and the team incredibly helpful and professional to deal with. Thank you for your help.

James