Unfortunately many companies face the daunting prospect of insolvency, and if this happens to your business, you need to ensure that everything is done correctly during the liquidation process and beyond.
If you suspect that your company is insolvent, i.e. it can no longer pay its debts as they fall due or its liabilities exceed its assets, then there are several duties that fall on you as a director. And if you care about the future of your business reputation, then liquidating your insolvent company through a Creditors’ Voluntary Liquidation (CVL) will likely be the best option for you.
How does a CVL work?
A CVL is commenced by you as the director or shareholder of your company, and it involves a liquidator realising all of the assets of your company then distributing the sums raised to creditors.
In order to propose a CVL:
- Your company musn’t be able to pay its debts – i.e. it is ‘insolvent’
- The shareholders must agree and pass a ‘winding-up resolution’.
Not only can a CVL help you to avoid allowing your company to go into Compulsory Liquidation, it means you are fully acknowledging your legal duties as a director. Once your company goes into a CVL, it will stop trading and be liquidated – i.e. ‘wound up’.
The benefits of a CVL
There are some key benefits to going through a CVL, with the one of the main ones being the ability for you to take control of a difficult situation, rather than living in fear of things happening to you.
By choosing to go through this process you’ll be fully acknowledging your legal duties to your creditors, with the benefit of avoiding any risk of “wrongful trading.” Of course you’ll be in control throughout the process, as you’ll be able to appoint a Licensed Insolvency Practitioner (IP) who you want to do the liquidation. Meaning you will be able to influence things like what date to have your statutory meetings etc. Above all though, this is a cost-effective way of formally shutting down your business, while ensuring nothing comes back to “haunt you” – for example, any unknown bills due to the Revenue dating back several years.
Weigh up your options
Remember, when your company is insolvent, you have a duty to take insolvency advice. As you must take the necessary steps that will be best for your creditors. Even though a CVL can be highly beneficial, it’s important to review all your options to find out the best approach you can take.
The best thing you can do is speak to an experienced licensed insolvency practitioner to get the right advice for you and your situation. At Clarke Bell, we’ve got over 28 years of experience helping company directors through the liquidation process.
For more information about our affordable CVL service from £2,995, just give us a call on 0161 907 4044 or [email protected] – you can also contact us for free and confidential advice from our team of experts.