Voluntary Liquidation

Thinking of Voluntary Liquidation? What Are Your Options?

Voluntary Liquidation describes the process by which a limited company is wound up. It was created by the 1986 Insolvency Act, is commonly known as creditors voluntary liquidation, or shortened to CVL. The term creditor’s voluntary liquidation derives from the fact that the creditors at an open meeting vote to close the company.

A voluntary liquidation is a process commenced by the directors of the business, who will have concluded that the business is insolvent and in its current firm cannot be saved. The Directors report this conclusion to the shareholders. The directors are able to present their own petition, but this is very rarely how many proceed. The vast majority will seek the expertise of a professional known as an insolvency practitioner who has a licence allowing him to administer the affairs of the company, and close it down.

The proposed liquidator will help the directors call a meeting of those owed money. They will prepare a report, called a statement of affairs, which sets out the financial problems in the company. The report will detail the assets of the business. These will, on the majority of occasions, be simply sold off at fair value to a new entity.

As part of the voluntary liquidation the liquidator will take steps to collect any assets, liaise with creditors and banks and generally run the affairs of the company down. He will advertise the demise in a local paper and the London Gazette, and finally usually 6-12 months later close the liquidation. At this stage, creditors and directors alike will have moved on and the company will be another statistic.

Each quarter about 2300 companies go through the process of voluntary liquidation.

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