Despite both terms relating to companies that have debts, a CVL and a CVA are actually two very different processes.
The main difference between a CVL and a CVA is that with a CVL your company is liquidated and ceases to trade; with a CVA your company continues to operate.
There is a lot more to both processes, which we will explain here.
What is a CVL?
A CVL (Creditors’ Voluntary Liquidation) is a process whereby you decide to close your company because it has debts that it is unable to pay.
As a director you can propose a CVL if your company is insolvent and if the shareholders agree and pass a winding-up resolution.
Despite your company being liquidated due to debts, a CVL is one of the best courses of action you can take as it acknowledges your duty as a director to your creditors. And entering into Creditors’ Voluntary Liquidation means your reputation won’t be damaged should you wish to start a new company in the future.
What’s involved with a CVL?
- First and foremost, you should contact a licensed insolvency practitioner, such as Clarke Bell. That way, you can rest assured that everything is being taken care of in a legal and correct way.
- Our first job is to ensure we give you the correct advice – which is always free. This is to make sure that a CVL is indeed the best option for you and your company to go down. If it’s not, we’ll always tell you.
- Then once you instruct us to work on your behalf, we’ll collect the necessary information we need from you – including a full list of creditors and copies of the accounts. Before liquidation proceedings can commence your company needs to have ceased to trade.
- You’ll need to hold a board meeting where the company directors formally resolve the company is insolvent and cannot continue to trade.
- You’ll then have a members’ meeting at the Clarke Bell offices (or via Skype). After this meeting is over, your company is now in formal voluntary liquidation.
- As part of the process we are required to conduct a “SIP 2 Investigation” where we look into the way in which the business was conducted.
For companies that have up to 10 creditors, no assets and no employees, we charge a standard fee of £1,995 (including VAT) for a Creditors’ Voluntary Liquidation (CVL). We can provide a quote for more complex cases.
What is a CVA?
Rather than closing your company down, a CVA (Company Voluntary Arrangement) is designed to get your business back on track. It can be helpful if your company has mounting debts and you want help in delaying or reducing payments.
Entering into a CVA means your company puts forward a formal proposal to its creditors for a composition in satisfaction of its debts. This Company Voluntary Arrangement can last up to 5 years and the agreement means the creditors accept a sum of money as a way of settlement towards the debts which are owed to them.
A CVA requires the approval of at least 75% in value of the creditors. A CVA cannot go ahead without this. By instructing the help of Clarke Bell, we can help you to establish this arrangement with your creditors.
A Company Voluntary Arrangement (CVA) is only really viable if you think that your company can become profitable again in the future. A CVA can also be used as an exit route from an administration.
What’s the right option for my company?
If you’re unsure what the right course of action is for you, your company and your creditors, we can help you.
Our advice is confidential and free, and our fees are affordable.If your company is struggling to pay its debts and has cashflow problems, contact us on 0161 07 4044 or [email protected]