This video features a brief explanation of the CVL from Michael Chamberlain.
What is it?
Creditors’ Voluntary Liquidation is a process by which the directors of a company hold a meeting to resolve that the company should be placed into insolvent liquidation. A general meeting of the shareholders is convened at which resolutions are passed that the company should be wound up and a Liquidator is appointed, a decision of creditors is then sought to confirm the shareholder nominated liquidator. A licensed insolvency practitioner must be appointed to act as the liquidator.
Who is it for?
- If the company is no longer viable.
- If the company cannot pay its creditors and is continuing to make losses.
- A profitable core business can be salvaged but a CVA is either not viable or not the preferred option for the directors. The business and assets can be bought from the liquidator to restart the viable core business in a new company.
How can Chamberlain & Co help?
The company will need to instruct an insolvency practitioner such as Michael Chamberlain of Chamberlain & Co to advise the directors on the most appropriate course of action. If liquidation is the chosen option a Michael Chamberlain as a licensed insolvency practitioner can be appointed as the liquidator.
The shareholders resolve to wind up the company by ordinary resolution. The creditors also meet to receive a report from the directors of the company regarding the history of the company and the reasons for its failure and to ratify or otherwise the appointment of the Liquidator appointed by the shareholders. It is the Liquidator’s duty to realise the assets, investigate the company’s affairs, report on the directors’ conduct and distribute funds available in the relevant priority.
Advantages of Company Liquidation
- The insolvency practitioner takes control of company.
- The directors will have no further responsibility for the company.
- Once the company is in liquidation, the directors are relieved from the ongoing risk of claims from creditors for wrongful trading.
- Employees arrears of wages, holiday pay, pay in lieu of notice and redundancy are met by the Government under the Redundancy Payments Act.
- The business and assets can be bought from the liquidator free of the liabilities incurred by the company.
- Liquidation is usually slower to initiate than an Administration.
- Trading can be more disrupted in this process compared with other insolvency options.
- Realisations are often restricted due to the distressed nature of the circumstances.
- If employees immediately transfer to a new company conducting substantially the same business activity any employee liabilities may be subject to TUPE (Transfer of Undertaking – Protection of Employment) regulations. Consequently the new company may be required to meet these liabilities rather than the Government.