Creditors Voluntary Liquidation ("CVL")

An insolvent company is wound up on a voluntary basis when the shareholders pass the appropriate resolutions at a company meeting held at not less than 14 days’ notice. The shareholders will also appoint a liquidator(s) at the same meeting. Full notice can be waived by shareholders if those holding at least 90% agree.

Following a decision procedure for creditors, normally held soon after the shareholders’ meeting referred to above, the liquidator’s appointment is ratified.  However, creditors can request a physical meeting if certain criteria are met.  At such a meeting, creditors can overturn the shareholders nomination for a liquidator.

The directors are obliged by the Insolvency Act to present a statement of affairs and provide information to creditors on the company’s affairs and its reasons for failure.  

Once appointed, the liquidator’s statutory duties include;

• Disposing of the company’s assets for the maximum achievable, in most circumstances using the services of an independent valuer.
• Assisting those creditors with security over assets in recovering assets due to them.  This can include leasing and hire purchase companies, suppliers with retention of title clauses for goods supplied that are not paid for and factoring companies holding security over the company’s book debts.
• Assisting employees of the company in recovering their statutory entitlements for unpaid wages, holiday pay, notice and redundancy from the National Insurance Fund.
• Investigating the conduct of the directors and making the appropriate report to the Department for Business, Innovation and Skills who will decide whether disqualification action against the directors is appropriate.
• The liquidator also has a duty to further investigate whether any transactions have taken place in the period leading up to liquidation that has been to the detriment of creditors.

In both voluntary and compulsory liquidations, a minimum of 3 and a maximum of 5 creditors may be elected to serve on a liquidation committee.  The committee's prime function is to assist the Liquidator in carrying out his investigative duties and to pass certain resolutions on behalf of the body of creditors.