Creditors' Voluntary Liquidation (CVL)

Understanding the liquidation of an insolvent company through a CVL

If your company cannot pay its debts as they fall due, or its liabilities exceed the value of its assets, a CVL is usually the most appropriate route to closure. It ensures creditors are treated fairly, protects you from accusations of wrongful trading, and allows the company to be wound down under your control rather than being forced into compulsory liquidation by a creditor.

We help directors through the CVL process every day. If you’re considering liquidation, we’re here to explain your options clearly and help you take the right next step.

What is a Creditors’ Voluntary Liquidation?

A CVL is a director-led process which is entered into voluntarily. As a director, you make the decision to place the company into liquidation, rather than waiting for a creditor to force this action on you through the courts. As part of the CVL process, a licensed insolvency practitioner must be appointed to act as liquidator. It is then their role to manage the liquidation process from start to finish.

The liquidator’s role is to realise the company’s assets (this means identifying and selling anything valuable the company owns), investigate the company’s affairs and the conduct of its directors in the period leading up to insolvency, and distribute the proceeds to creditors in the statutory order of priority. Once the process is complete, the company is dissolved, removed from the Companies House register, and thereafter ceases to exist as a legal entity.

Any debts that remain unpaid following liquidation are written off unless you have given a personal guarantee for any business borrowing. If a personal guarantee is in place this will crystalise upon the liquidation of the company and responsibility for repaying the remaining sum will fall to you as an individual. If no personal guarantee is in place, then creditors cannot pursue you personally for company debts once the CVL is complete, provided you have met your legal duties as a director.

Is a CVL right for my company?

A CVL is often the right option when your company is insolvent and there is no realistic prospect of rescue or recovery. If you are the director of a company you believe may be insolvent, you should strongly consider a CVL if:

• Your company cannot pay its debts as they fall due (this is known as being cash flow insolvent)
• The total value of your company’s liabilities exceeds the value of its assets (this is known as being balance sheet insolvent)
• Creditors are actively chasing payment and are putting an increasing amount of pressure on you and your company
• You have been served a statutory demand or a winding up petition from a disgruntled creditor
• You want to close the company and bring its affairs to an end in a controlled and legally compliant way

If your company is solvent and you simply want to close because you no longer require it, you don’t need a CVL. A Members’ Voluntary Liquidation (MVL) or voluntary strike off would be more appropriate. If you’re unsure which route applies to your situation, we can help you work it out during a free initial consultation.

How does the CVL process work?

The CVL process follows a clear, structured sequence. Here’s what happens at each stage:

Step 1: Initial consultation with an insolvency practitioner
Once you know or suspect your company to be insolvent, you should contact a licensed insolvency practitioner for a free, confidential consultation. The insolvency practitioner will review your company’s financial position, discuss your options, and confirm whether a CVL is the right route. If it is, they’ll explain the process, costs, and timeline.

Step 2: Board meeting and preparation
The directors hold a board meeting to formally resolve to place the company into liquidation. The insolvency practitioner will help you prepare a Statement of Affairs which provides a snapshot of the company’s assets, liabilities, and creditor details at the time of liquidation.

Step 3: Shareholders’ resolution
A meeting of shareholders is held, at which 75% of shareholders (by value) must vote in favour of a winding-up resolution. This is taken as the formal decision to liquidate the company.

Step 4: Filing and notification
The winding-up resolution is filed with Companies House within 15 days and advertised in the Gazette within 14 days. From this point, the company is officially in liquidation.

Step 5: Creditor notification and deemed consent
Creditors are notified of the liquidation and provided with a copy of the Statement of Affairs. Under the Insolvency Rules 2016, a formal creditors’ meeting is no longer required in most cases. Instead, a deemed consent process is used whereby creditors are given the opportunity to object to the appointment of the liquidator and appoint one of their choosing. If no objection is received, however, the director's choice of insolvency practitioner will be formally appointed.

Step 6: Asset realisation and distribution
As part of their role, the insolvency practitioner will begin liaising with creditors and identifying assets of the company which can be sold to generate funds. Once assets have been sold, the insolvency practitioner will distributes the proceeds to creditors according to a set order of priority. Secured creditors are paid first, followed by preferential creditors, (including employees and HMRC for some tax debts), with unsecured creditors last in the pecking order. In many insolvent liquidations, there is very little - if anything - left for unsecured creditors.

Step 7: Investigation and reporting
The liquidator is required to investigate the conduct of the company’s directors in the period leading up to the company becoming insolvent. This is a standard part of every CVL and is a legal requirement. The investigation looks at how the company was run and whether there is any evidence of wrongful or fraudulent trading. A report is then submitted to the Insolvency Service who decide whether the directors have a case to answer. It should be said that the Insolvency Service deciding to take further action is extremely rare and not something the vast majority of directors need to worry about.

Step 8: Company is dissolved
Once the insolvency practitioner has completed their work, they apply to have the company dissolved at Companies House. Once the company is removed from the Companies House register, the liquidation is complete and the company no longer exists as a legal entity.

The entire liquidation process typically takes between 12 and 18 months from start to finish, although simple cases can be concluded more quickly. Despite the timeline, a director's involvement is typically contained to the first few weeks; after this, the appointed insolvency practitioner will deal with every part with no further input required from the directors.

Find your BTG Begbies Traynor professional

 

Use our people search to find the person you need based on location or skillset.

People search

CVL timeline at a glance

How much does a CVL cost?

CVL fees typically start from around £3,000 to £4,000 plus VAT for straightforward cases, though the total cost will depend on the complexity of the company’s affairs including the number of creditors involved, the types of assets the company has, and the scale of director investigation required. Your insolvency practitioner will be able to provide a clear fee estimate before you commit to anything.

If your company has no cash to fund the CVL, there are options. We cover this in detail in our guide to how to close a company with no money, but in summary:

• The liquidator’s fees are typically paid using company assets, meaning directors don’t need to fund the liquidation process personally
• Directors who are also employees of their company may be able to claim redundancy pay through the Redundancy Payments Service upon the liquidation of their company
• Depending on your situation, you may be able to pay for the liquidation in instalments and spread the cost over several months
• As a last resort, directors can fund the CVL from personal savings or borrowing

Advice on closure options

 

Arrange a free consultation with an insolvency professional at BTG Begbies Traynor – choose a time at your convenience and with no obligation.

Free consultation

What happens to me as a director during a CVL?

One of the biggest concerns we hear from directors considering liquidation is what will happen to them on a personal level during and after the liquidation process. Here’s what you need to know:

• The company's debts
  Once the CVL is complete, any company debts which remain unpaid are written off. Creditors cannot pursue you personally for repayment unless you have given a personal guarantee for a specific debt. If you are concerned about an outstanding personal guarantee, you should bring this up in your discussions with your insolvency practitioner who will be able to provide you with practical advice on how to deal with it.
• Your future as a director
  Entering into insolvent liquidation does not automatically prevent you from being a director of another company in the future. In fact, in the vast majority of cases, directors are free to start a new business or act as the director of an existing company. However, there are rules around using a similar company name (known as phoenix company rules under Section 216 of the Insolvency Act 1986), so you should always check with your insolvency practitioner if you are intending to continue trading under a similar name in the future. 
• Your conduct as a director
  The liquidator will review your conduct, but this is standard procedure and not something to fear if you’ve acted honestly. The key question is whether you continued trading while knowing the company was insolvent. If you sought professional advice early and acted to protect creditors, a CVL is evidence that you did the right thing. For more detail, see our guide to what happens to directors of an insolvent company.
• Your employees
  Any employees of your company will be made redundant by the liquidator as part of the CVL process. Eligible employees can claim redundancy pay, unpaid wages, holiday pay, and notice pay through the Redundancy Payments Service (funded by the National Insurance Fund) if the company is not able to cover the amounts owed. For more detail, see our guide to employee redundancy payments during insolvency.

CVL vs other options — what’s the difference and which option is right for you?

CVL vs compulsory liquidation
In a CVL, you choose to liquidate the company and appoint your choice of insolvency practitioner. In compulsory liquidation, however, these decisions are taken out of your hands and instead a creditor forces the liquidation upon your company through a court petition. The key difference is control: with a CVL, you appoint your own insolvency practitioner, you prepare properly, and you demonstrate responsible conduct in the process. With compulsory liquidation, the Official Receiver takes over, your bank accounts are frozen immediately, and the investigation into your conduct takes into account the fact you did not take action once you realised your company to be insolvent.

CVL vs company administration
A CVL is a terminal process which brings about the closure of the company. Company administration, on the other hand, is a rescue procedure that aims to save the viable elements of the business (or achieve a better outcome for creditors than an immediate liquidation would). If there’s a realistic prospect of rescuing your business as a going concern, administration should be explored first. If rescue isn’t viable, a CVL is the appropriate next step.

CVL vs Company Voluntary Arrangement (CVA)
A Company Voluntary Arrangement (CVA) allows an insolvent company to reach a mutual agreement with creditors to repay a proportion of its debts over a set period of time (typically 3-5 years) while continuing to trade. A CVA is only suitable if the underlying business is viable and creditors have confidence that the company will be able to adhere to the proposed repayments for the length of the CVA term. If the business cannot be saved, a CVL is likely to be the right option.

Advantages and disadvantages of a CVL

CVL Advantages

• You take control of the liquidation process rather than having it forced on you by creditors and the courts
• Any company debts which cannot be repaid (unless personally guaranteed) are written off as part of the CVL
• Employees can claim redundancy pay and other statutory entitlements
• Demonstrates to the Insolvency Service that you acted responsibly as a director
• You choose your own insolvency practitioner
• Brings creditor pressure and chasing to an end immediately as the insolvency practitioner will handle all creditor liaisons once appointed
• Allows you to deal with the company's problems in a responsible manner and give you the chance to move forward

CVL Disadvantages 

• The company will be closed for good as a CVL is a closure, not a rescue option
• There are professional fees involved (typically from £3,000–£4,000+)
• Your conduct as a director will be investigated (although this is standard procedure and not something to fear if you’ve acted honestly in your role as director)
• Any debts secured with a personal guarantee will crystalise upon the liquidation and creditors can still pursue you for these amounts. See our guide to personal guarantees for more detail
• If the investigation reveals misconduct, you could face director disqualification or personal liability for some debts, although this is extremely rare

How to start the CVL process

The first step is always a conversation. Call us for a free, confidential consultation with one of our licensed insolvency practitioners where we can talk through your company’s situation, confirm whether a CVL is the right option, and explain exactly what happens next. At BTG Begbies Traynor, we deal with CVLs every day and we understand the stress you’re under. Our team of licensed insolvency practitioners are here to make the process as straightforward as possible.

Ready to take the next step? Call BTG Begbies Traynor for a free, same-day consultation. We have over 100 offices across the UK and can offer immediate help and advice.