Employees
Employment usually ends when trading ceases or shortly after liquidation begins, although the timing depends on the circumstances. Eligible employees may claim certain statutory sums, subject to the applicable rules and limits.
Creditors' voluntary liquidation (CVL)
An orderly route when an insolvent company cannot continue.
A CVL is initiated by the directors and shareholders. It places control with a licensed insolvency practitioner and provides a statutory framework for employees, assets, creditors and the closure of the company.
Before the first call
Keep the position clear and protect the records.
- Preserve accounting records, bank statements, asset information and creditor correspondence.
- Avoid taking new credit or making payments without understanding the creditor impact.
- Prepare a current cash position, creditor list, employee information and details of company assets.
When it may apply
A CVL may be appropriate when rescue is no longer realistic.
The correct route depends on the full financial and commercial position. These indicators are a starting point, not a substitute for advice.
- The company cannot pay debts when they fall due
- Liabilities are greater than the value of the company's assets
- HMRC, suppliers or lenders are taking recovery action
- There is no credible funding or restructuring solution
- The business has ceased or should cease trading
- The directors want to implement an orderly closure
Points to consider
What the board needs to understand.
We explain both the intended benefit and the practical implications before a decision is made.
Assets and trading
Company assets are valued and realised. Any connected-party proposal must be properly assessed, documented and conducted.
Director conduct
The liquidator reviews the company's affairs and submits statutory information concerning director conduct. Cooperation and complete records are important.
Personal exposure
Guarantees, overdrawn loan accounts and particular transactions should be considered separately from ordinary company liabilities.
Creditors
Creditors receive statutory information, can participate in the decision process and may receive a distribution where funds permit.
Costs and funding
The asset position, complexity and work required affect costs. These are explained after the circumstances have been reviewed.
The process
A clear sequence from advice to implementation.
- 01
Review and board decision
The directors consider up-to-date financial information, advice and the alternatives before resolving that the company should be wound up.
- 02
Information and notices
The company prepares the required financial and creditor information and the statutory shareholder and creditor processes are arranged.
- 03
Appointment
Shareholders resolve to wind up the company and creditors participate in the statutory decision concerning the liquidator.
- 04
Liquidation work
The liquidator takes control, realises assets, agrees claims, investigates the company's affairs and distributes funds where available.
Common questions
What directors usually want to know.
Every company is different. These answers provide general guidance only.
How quickly can a CVL start?
The timetable depends on the information available, required notices and any immediate creditor action. A specific timetable can be given after the position is reviewed.
Can the business or assets be sold?
Potential sales can be considered, including connected-party interest, but value, marketing, conflicts and creditor outcomes must be properly addressed.
Can I be a director of another company?
Liquidation does not automatically prevent this, but restrictions on prohibited company names and any disqualification issues must be observed.
Will I have to repay company debts?
Not ordinarily, but guarantees, loan accounts and conduct-related claims can create separate personal exposure.
A useful first step
Discuss the facts before deciding on a process.
Answer a small number of questions about the pressure facing the company. The initial discussion is free and without obligation. Fees for any formal work are explained before an instruction is accepted.