What is a CVL?

• Liquidation is the process whereby a company's existence is ended, its affairs wound up and its assets realised.

• This occurs when the directors decide to put a company into liquidation because it is insolvent.

• A company is insolvent if it cannot pay its debts as and when they fall due or its liabilities are greater than the value of its assets.

What is the purpose of a CVL?

• To appoint a Liquidator (who must be a Licensed Insolvency Practitioner) who has a duty to collect the company's assets and distribute them to its creditors.

• Allows directors to deal voluntarily with their company's insolvency, rather than leaving the matter to creditors to enforce liquidation through the courts.

How do you place a company into CVL?

• The directors will instruct a licensed insolvency practitioner (IP) to assist them in drafting the necessary documentation to pass resolutions to hold a meeting of shareholders and to seek the decision of the company's creditors to place the company into CVL.

• A board meeting of the company is held to summon meetings of shareholders and creditors.

• A shareholders meeting is held to pass resolutions that the company be wound up voluntarily and appointing an IP as Liquidator. 

• The resolutions passed by the shareholders are then considered by the creditors by a decision procedure.

• The decision procedure may take place by:

  • Virtual meeting - where the creditors are invited to attend a meeting through an IT platform (i.e. a video conference), or by a telephone conference call.

  • Deemed consent - no creditors' meeting is held, but creditors are notified that the decision reached by the shareholders will be passed by deemed consent at a date and time specified in the notice.

• A physical meeting will be held if:

  • 10% of creditors in value

  • 10% of creditors in number, or

  • 10 creditors​​

 request that a physical meeting is held instead of a virtual meeting, or object to the decision being passed by deemed consent.​

• A Statement of the company's affairs and report on the history of the business and the causes of failure is provided to creditors with notice of the decision procedure.

• At the time of the decision procedure, three to five creditors may be nominated to act as members of a liquidation committee to represent the creditors and to assist the liquidator.

What are the duties of the Liquidator?

• To realise the assets of the company

• Investigate the cause of the company’s failure and submit a report to the Insolvency Service on the conduct of the directors

• To agree creditors’ claims and, if funds are available, declare and pay a dividend to creditors.

• To act in the best interest of all creditors.