This procedure is usually resorted to when a company is insolvent and cannot continue trading.
If your business experiences these circumstances, remember that this is the most common form of liquidation in the UK. You will certainly not be alone in having to go through the process of a CVL.
With the assistance of our Insolvency Practitioners, the directors will arrange meetings with creditors in order to wind the company up and appoint a Liquidator, at which point, if it had not already done so, the business ceases to trade.
The company’s assets, including any book debts, are realised and proceeds used to fund the cost of the liquidation. Any excess funds would be available as a dividend to creditors by order of priority.
If the company has insufficient assets to cover the associated costs, the Liquidator may require the directors to personally pay the costs, which would have been agreed between both parties prior to the liquidation.
A report will be presented at the meeting of creditors, which will detail the history of the company, its financial circumstances and why it has gone into liquidation. Creditors are given the opportunity to question the directors and then formally vote for the appointment of a Liquidator.
This may seem cumbersome, but the issues are complex and require correct handling, and there is no doubt that the process is preferable to the months of anxiety which you and your business have probably already endured.