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Creditors' Voluntary Liquidation (CVL)

The process for creditors’ voluntary liquidation:

  1. The company directors become aware that the company is ether cash flow or balance sheet insolvent.
  2. The company directors consult with a licenced insolvency practitioner.
  3. If the directors are advised to commence creditors’ voluntary liquidation, they hold a board meeting to formally resolve to place the company into liquidation.
  4. The company directors appoint an insolvency practitioner.
  5. Notices are issued to shareholders and creditors giving notice of a meeting.
  6. The shareholders and creditors receive an estimated statement of affairs of the company which provides an estimate of assets and liabilities and an overview of the trading history and financial status.
  7. The meeting of shareholders and creditors takes place at which at least 75% of shareholders must resolve to wind up the company.
  8. The insolvency practitioner as liquidator sells all saleable company assets and liaises with creditors.
  9. When the liquidation process is complete the company is struck off the register at Companies House.


What is Creditors' Voluntary Liquidation? Creditors' Voluntary Liquidation Explained

A creditors' voluntary liquidation occurs when a company is insolvent, i.e. no longer able to pay debts, and the directors of the insolvent company take the decision to go into liquidation voluntarily. There are two tests for insolvency. A company is cash flow insolvent if it cannot pay its debts as they fall due, and balance sheet insolvency, which is when total liabilities are more than total assets.

When a company is insolvent and enters liquidation, whether voluntarily or forced liquidation by creditors, the liquidators are required to look at actions taken by the directors and any former directors within the last 3 years, to establish that they did not trade while the company was insolvent in a way that was to the detriment of creditors, or engage in transactions which can be considered wrongful or fraudulent trading. If wrongful or fraudulent trading is proven the directors may become personally liable for some or all of the company’s debts.

When the directors are aware that the company is insolvent, no overdrawn bank account should be used.

When the directors are aware that the company is insolvent, they should not obtain any further credit, and if the company cannot pay all its creditors, they must be careful not to make payments to some creditors at the expense of others as this could later be considered as making preference payments. The making of preference payments could result in the directors being liable for repayment of such amounts.

Directors of an insolvent company cannot withdraw or move cash or assets out of the company, as this would be to the detriment of the company’s creditors.

When it is no longer viable for the company to trade liquidation may the only option. This is intended to release as much as possible from the assets to pay off creditors. With a creditors’ voluntary liquidation, the directors can nominate their own liquidator to handle the process of liquidation and making distributions to creditors. This differs from compulsory liquidation which is liquidation by the courts.

When a company enters creditors’ voluntary liquidation there is likely to be a shortfall to creditors which is written off when the company is liquidated. Provided that the directors have not been found to have engaged in wrongful or fraudulent trading, they are normally free to move on from the failed business without any personal liability. The exception to this would be if the directors had signed any personal guarantees, in which case they remain responsible for paying the amounts owed under the guarantee.

When the directors consider that their company could be insolvent, they should consult with a licenced insolvency practitioner. If the advice of the insolvency practitioner is that the company should enter liquidation, the directors will hold a board meeting to make a resolution to place the company into liquidation.

The directors will then formally appoint a licensed insolvency practitioner whose job it will be to prepare all the relevant documentation and manage the liquidation.

The shareholders and creditors are then notified of the time and venue for a general meeting and the effective “decision date” of liquidation. The insolvency practitioner will prepare information for the creditors including an estimated statement of affairs of the company.

The estimated statement of affairs of the company outlines the financial status of the company including its liabilities, assets, and an estimate of the realisable value of the assets which may be less than the valuation shown in any previously prepared balance sheets.

The insolvency practitioner will also prepare a report showing how the company was trading and events leading up to the liquidation process.

At the general meeting of shareholders and creditors at least 75% of shareholders must agree to wind the company up for the liquidation to proceed.

The liquidator will ensure the company’s assets are independently valued to determine a fair market price, and assets will be sold and the proceeds paid out to the company’s creditors. The directors may offer to buy any of the company’s assets provided the sale is negotiated and arranged with the liquidator and the price is the market value.

When the creditors' voluntary liquidation is complete the company is removed from the register of Companies House, a process called Striking Off. Once the company is struck off it ceases to exist as a legal entity.


Creditors' Voluntary Liquidation Notices

The following is a list of Notices that can be published during the process of creditors’ voluntary liquidation and what they mean:

2441 Resolution for Winding-Up (Notice 2441 under Creditors' Voluntary Liquidation). This notice is placed by the company after a meeting of its shareholders has passed a special resolution that the company should go into voluntary liquidation.

2442 Meetings of Creditors (Notice 2442 under Creditors' Voluntary Liquidation). The liquidator or the company or convener places this notice for any meeting of creditors, whether virtual or physical, due to take place in a creditors’ voluntary liquidation or for the purpose of ascertaining the wishes of the creditors in matters relating to the liquidation.

2443 Appointment of Liquidators (Notice 2443 under Creditors' Voluntary Liquidation). This provides details of the date of appointment, name and address, and contact details of the liquidators in a creditors' voluntary winding-up.

2444 Annual Liquidation Meetings (Notice 2444 under Creditors' Voluntary Liquidation). If the liquidation takes more than a year there can be meetings of company and creditors at each year's end.

2445 Final Meetings (Notice 2445 under Creditors' Voluntary Liquidation). This notice is placed by the liquidator. The notice provides the date and time and place of the final meeting of creditors and final general meeting of the company before the company is dissolved.

2446 Notices to Creditors (Notices 2446 under Creditors' Voluntary Liquidation). The administrator or liquidator places this notice of the intention to make a distribution to creditors of the company.

2447 Deemed Consent (CVL) (Notice 2447 under Creditors' Voluntary Liquidation). The liquidator places a notice seeking approval from creditors in respect of their proposals or a revision of original proposals. The proposals will be approved unless the liquidators receive objections from 10% or more of creditors.


See also corporate insolvency:


Creditors' Voluntary Liquidation (CVL)

Winding Up Petitions and Winding Up Orders

Members’ Voluntary Liquidation (MVL)


Company Voluntary Arrangement (CVA)


Company Insolvency Procedures

Warning Signs of Insolvency


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