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Creditors’ Voluntary Liquidation

Creditors’ Voluntary Liquidation (CVL) can be defined as the voluntary winding down of a company and liquidation of all assets. An insolvency practitioner is chosen to be the liquidator by the business’ creditors. As a result, directors and shareholders lose much of their influence over the business. Creditors’ Voluntary Liquidation is a solution to insolvency and is a way of settling business debts.

Why do shareholders and directors choose CVL?

The law clearly forbids trading when a company is insolvent. Directors and shareholders can face various risks if they do not choose CVL in the early stages of insolvency and could even be held accountable for wrongful trading. The benefits of CVL include:

  • Shareholders and directors choose when to implement CVL and therefore stand a better chance of maximising the return on assets and minimising any losses.
  • Shareholders and directors also have the opportunity to create reports and explain the factors that may have caused insolvency which could potentially alleviate creditor complaints
  • Shareholders and directors can address any concerns they have regarding personal liability with the insolvency practitioner before the actual CVL process begins

Important points to remember

  • It is crucial that you seek specialised legal advice before making any concrete business decisions; Lance Mason can offer this advice free of charge in the first instance
  • CVLs can be legal minefields and you need to make sure you are represented by a credible and experienced firm
  • When liquidation is managed carefully, as it usually is with CVL agreements, it can provide an opportunity for a fresh start

Get in touch

For a free consultation on Creditors’ Voluntary Liquidation, contact Lance Mason today on 08000 84 2000.

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