Insolvency Solutions by Gregory Michaels & Co (UK)

Creditors' Voluntary Liquidation (CVL)

When is it used ?

This form of liquidation of a company is the most widely used after the introduction of the Insolvency Act 1986.
This form of winding-up is used when the company is insolvent. A company is insolvent by not having enough assets to cover its debts (i.e. the value of assets is less than the amount of liabilities) or is unable to pay its debts when they fall due.

How is it used ?

The directors call meetings of members and creditors to appoint a liquidator.

Members' Meeting

The members appoint a liquidator.

Creditors' Meeting

The creditors either confirm the nomination of the members or appoint another liquidator. The creditors appointment of the liquidator takes priority over the members.

The Role of the Liquidator

The liquidator's role is to realise the assets of the company and to distribute them to the creditors in accordance with the Insolvency Act 1986. The other role of the liquidator is to investigate the affairs of the company and take appropriate actions against the directors for any wrong-doing on their behalf. This may take the form of civil action against the directors for fraudulent trading, wrongful trading, transactions at under value or preferences. The liquidator also has to submit to the Department of Trade and Industry a report under Section 7(3) of the Company Directors Disqualification Act 1986 (CDDA86) or a return under Rule 4 of the Insolvent Companies No 2 Rule 1986.

Liquidator's Remuneration

The liquidator's remuneration is fixed by the liquidation committee or by the creditors. It must be either:
1. As a percentage of realisations, a percentage of distributions or a combination of both.

2. Based on time costs of the liquidator and his staff.

Further Information on Insolvency

• Useful Information on All Aspects of Insolvency
• Businesses and Assets for Sale in Insolvency Cases