A Creditors’ Voluntary Liquidation, or CVL, is a formal process in which the directors of the company which is insolvent agree to bring its existence to an end. It is the corporate version of a funeral. While the name implies it’s an action taken by creditors, it’s actually the directors who start the process and who bring it to shareholders for a vote. The process must be carried out by a licensed insolvency practitioner.
Where a company has more liabilities than assets or cannot pay debts it is usually advisable to liquidate via a CVL. It is a quick way to close a limited company and to stop creditors putting business owners under pressure.
The directors and shareholders place the company into liquidation and the creditors confirm their choice of liquidator. The liquidator deals with the assets and liabilities of the company sharing them out equally between each class of creditor.
A voluntary liquidation has many benefits and allows you to comply with your statutory and fiduciary duties in relation to the company, and it may be that the assets available within your company will pay the costs of the process.
If you want to minimise your business losses and personal risk please call for an informal chat on 0345 260 0101 and ask to speak with either Jeremy Frost or Patrick Wadsted. We cover the whole of the UK and look forward to working with you.
This all depends on the company's specific financial situation and future prospects.
If the company is insolvent (unable to pay it's debts) and does not have a realistic prospect of recovery, a CVL is usually the best course of action to take. The process allows directors to take control of the situation, minimise their personal liability and ensure an orderly wind down of the company. If this is a route you are considering please give us a call and we can discuss your options, the first call or meeting is free and you can be assured the call is confidential.
Running a business is hard work and for many business owners it is like another family member. Apart from the risk involved there are many factors over which you have no control. If you are worrying about the viabillity of your business, if there is a downturn in sales, unexpected costs and no profit - we understand why you are here on our website right now.
You have probably seen the warning signs and feel constantly under pressure and have thought about turning the business around, but this takes effort. If you want to save the current business we have insolvency processes which can be used, but if you have assessed the situation and want to walk away reach out to us now. As a director you have a duty to act in the creditor's interests and failure to act correctly may leave you open to personal liability. This is the time to speak to us, have an open and honest conversation and let's set you on the right track - it is a cliche, but a conversation now will help you to sleep better tonight.
The popularity of our MVL packages and fixed fee price levels have led us to develop similar service levels for our CVL's.
We understand our client's expect to know precisely how much they will be paying when they contact us for a quote to place their company into liquidation. Prices start from £3,000.
Of course the prices will range depending on circumstances, but we have evaluated the market, our competition and most importantly our clients and have developed a Bronze, Silver and Gold service approach to our CVL's. Details are below, but as always it is good to talk to our experienced advisors, and we would encourage you to call us on 0345 260 0101 for a preliminary chat.
Facing the loss of your business and its continued income stream is traumatic - but we are here to listen, advise and assist. We hope our prices reflect our commitment to providing professional and honest advice at an affordable price.
Every client's needs are different when it comes to liquidation. That's why we offer a range of CVL options, with transparent pricing based on the complexity of the service required. Our experts have more than two decades' experience in taking businesses through a CVL, and can help you to navigate the process smoothly and successfully, making a distressing time as easy and stress-free as possible.
We have fixed fees for our CVL's - with prices starting from £3,000 for our basic service level. Frost Group will manage the entire process, communicate with creditors, value assets and comply with our statutory requirements. It is important that you share as much information as possible during your initial phone call, this will allow our consultants to advise on the most appropriate service level.
We understand you will be speaking to more than one Insolvency Practitioner and we encourage this. Find an Insolvency Practitioner you can trust and who is honest. Our advice to you is the cheapest option is not necessarily the best option. The Insolvency market is competitive and some business development consultants will say anything for a "sale" and commission. Some accountants even receive illegal "referral fees" by introducing clients to their "chosen" practitioner. Be assured we will be honest and transparent and pragmatic starting from our initial phone call. Please call our advisors on 0345 260 0101.
Qualifying criteria:-
Maximum of two directors and two shareholders
No right of retention issues
No employees
No assets
No finance agreement
No pensions
No overdrawn directors loans
Up to ten creditors
No Bounce Back Loans
Qualifying criteria:-
Assets over £5,000
Yes to finance agreements
Yes to warrantees
Yes to pensions
Yes to employees
Yes to creditors
Yes to Bounce Back Loans
Qualifying criteria:-
Fixed Assets including property and lease
Large creditor claims
Complex creditor claims
Pending litigation
Shareholder and director disputes
Bespoke advice
The Business Bounce Back Loans introduced by the Goverment during the Covid 19 pandemic were at the time a lifeline to businesses. All eligible business were allowed to borrow up to £50,000 with no personal guarantee.
We speak daily to directors who had to take out a business bounce back loan during the covid crisis. Although the covid pandemic was five years ago, the after effects of the lockdowns and disruption to trade are still being felt by businesses with many of these being family run businesses. Businesses have felt the impact not only financially but emotionally as well.
What was previously a lifeline repayment of these BBL's are in some cases pushing businesses to breaking point and many businesses are finding themselves unable to make repayments.
There are options available, including repayment holidays or extended terms, restructured repayments and also closing your company through the liquidation process. Using a CVL your company bounce back loan can be written off as unsecured debt. The Bounce Back Loan was an agreement between the lender and the company meaning it is the company and not the shareholders who are responsible for repayment.
However, the BBL must have been used correctly and have been spent on supporting the company in its day to day business activities. If it is discovered the BBL was used for personal reasons, for example paying off personal debts and purchasing personal assets, then it could become a personal liability and should be repaid from personal funds. For this reason, please call us and we can discuss your options. Please call us on 0345 260 0101 for free confidential advice.
Yes, if the company is still profitable but struggling to repay its Bounce Back Loan and other debts there are a range of options available, including refinancing and restructuring that can help ease cash flow. We find in many cases that the Bounce Back Loan will not be the only company debt. A CVA - Company Voluntary Arrangement may be a good option, especially if there are credit card and supplier debts. The business must be viable in the long term. Creditors must agree the terms and usually a monthly repayment is made for between 3-5 years. The creditors must agree to the terms and the agreement is legally binding
Liquidating your company can effectively clear an outstanding BBL. The BBL did not require personal guarantees and the loan is written off as part of the liquidation process. The Government through its guarantee will ultimately repay the lender.
Any Bounce Back Loan amount that is outstanding will be included in a liquidation. Any amount that cannot be repaid using company assets will be written off (including the Bounce Back Loan). As there was no personal gurantee attached to the Bounce Back Loan you will not be held personally liabile for repaying these funds so long as they have been used in the appropriate manner. BUT any misuse of the loan funds can lead to personal lliability for directors.
We are referring to mis-use of the Bounce Back Loan. Was the Business Bounce Back Loan used to provide an economic benefit to the business and was the BBL used within the business and definitely not for personall use? If the loan was used to pay staff wages, purchase machinery, pay rent, purchase stock etc these are all valid reasons and there would not be a misfeasance claim against the company.
Call us now to discuss your options. Be totally frank and honest on how the money was spent. Our Insolvency Practitioners will evaluate your position and advise on options. The money will have to be repaid and the Insolvency Practitioner will advise on the repayments required in terms of amount and period of time. Please don't be persuaded by advisors who suggest they can "write off" this debt due by you to the company - they are lying. It is not unheard of for unscrupulous Insolvency Practitioners to "discover" a Director's loan due by you to the company once they are appointed as a Liquidator - be honest and upfront with us and we will provide you with the correct advice and guidance.
There is a saying in our industry - "everyone wants Insolvency Practitioners to be honest except the one they instruct" - this sits comfortably alongside another well known saying "if it sounds too good to be true then it probably isn't".
Be honest with us and we will be equally honest with you. Know what you are facing and then plan for the future with no hidden fears.
The BBL was intended to help struggling companies during the challenging times of the pandemic, they were instigated to help companies survive. We have experience of directors taking out the loan as a somewhat last chance to save their business. However, if the BBL was misused directors can be held personally liable for the amount. Here are some examples of misuse of the BBL:-
1. Applying for the BBL fraudulenty, for example falsifying business turnover, multiple loan appllications or applying for a loan for a non existant business
2. Dividend payments have to be drawn from profit and not from the BBL
3. Personal expenditure for example, holidays and deposits on personal property or non business assets. Even if the money was spent by the directors themselves on general living expenses this could be viewed as misuse.
4. If the loan has been used for investment purposes for example business investments in crypto currency
5. Payments are made to creditors in preference - for example to pay off friends or family rather than HMRC or the Bank. These rules apply if the company is insolvent and an Insolvency Practitioner as Liquidator can demand repayment.
If you are worried you may misused your BBL call us for a chat. Our first steps will be to establish if the BBL has been misused and then we will help you to protect your position to reduce / minimise the potential fallout.
There is no personal liability attributable to obtaining the Business Bounce Back Loan, however, if it the loan was obtained providing false information and was not utilised for the purposes of what it was designed, then there is a risk a Liquidator could have a claim against the directors in their personal capacity. If the loan is used personal and preference payments have been made a Liquidator will hold you personally liable.
Please call our insolvency advisors to discuss on 0345 260 0101 the only advice we will provide will be transparent and honest.
Creditors can’t instigate a CVL, but they do have certain rights during this process. Creditors are entitled to see a list of all creditors of the company and view a summary of the Statement of Affairs prior to any decision-making process. They are involved in the process of appointing the named liquidator and are even entitled to create a committee to control liquidation costs. Employees and HMRC have preferential status for some their debt. In respect of the balance, creditors are paid on a Pari passu basis (“on equal footing”) i.e., each receive the same (%) of their debt. This is of course dependent course on whether the assets are sufficiently valuable to allow for a distribution.
When the company is liquidated, all assets are sold and the proceeds are distributed among outstanding creditors. Any company debts remaining are written off unless they have been secured with a personal guarantee (PG). Any PGs will crystalise at the point of liquidation, with the responsibility for repayment falling to the individual who provided the PG (usually the company director).
The company is then dissolved and ceases to be a legal entity. The insolvency practitioner handling the CVL process has a number of responsibilities, including liaising with creditors, identifying assets, ensuring the company is closed down properly and that the name of the business is removed from the Companies House register.
CVL proceedings are fast-paced and driven by deadlines. The first step is to call a shareholders meeting – shareholders must be given 14 days’ notice of the meeting, but it can go ahead at shorter notice if 95% of shareholders agree. This is the commencement of the Liquidation and following this meeting, the Directors have seven days to deliver their notice to creditors, requesting their vote on the resolutions passed. The decision date for these resolutions must be no earlier than three days after the delivery of the notice, but no later than 14 days after the shareholders’ meeting.
There are several reasons why a shareholders’ meeting is necessary during a CVL. While the process is instigated by the directors, it is the shareholders who own the company, and it is they that have to decide (via a special resolution) to voluntarily commence the “funeral”. It is also necessary to appoint a named liquidator too.
Insolvent companies can either be liquidated via a Compulsory Court Order or a voluntary process – a CVL is the latter. Compulsory liquidation is typically the result of creditors submitting a winding up petition against the company in question as a result of unpaid debts although it should be noted that a Winding Up Petition is a class action and not a debt collection process.
A CVL is a voluntary way of avoiding this issue as it’s initiated by the directors, when they conclude that the financial state of the company is beyond the point of repair. While not an ideal situation, it’s often the best solution for a company struggling financially, providing the best outcome for the business, staff and creditors.
Directors of insolvent companies have legal responsibilities to adhere to. When it becomes apparent that the business is in an insolvent state, they must endeavour to protect outstanding creditors which means prioritising their interests above their own as Director or Shareholder.
This means they should not engage in any activity that could worsen the position and it often means that the company needs to cease trading immediately. It’s a complex area which is why having the advice and guidance from a licensed insolvency practitioner is essential.
Often used interchangeably, there are actually two separate processes. Liquidation through a CVL brings about the end of an insolvent company (i.e. a funeral), while administration provides the chance for the business to be rescued through restructuring and refinancing. (a visit to the Accident and Emergency Department).
A company may be placed into administration if there’s a chance that the business, or parts of it, can be rescued or if there will be better returns for creditors. A CVL, however, is used when there is no chance of the business being saved.
Once the CVL has completed, the name and number of the company will be removed from the Companies House register which concludes the process and marks the end of the company. Just because you have been a director of a liquidated company doesn’t mean you can’t run a limited company again.
Unless there are specific terms that disqualify you from acting as a director, you can start trading with a new business, whether in the same industry or not. However, you are restricted from using the same, or a similar, trading name to the liquidated company. Speak to your insolvency practitioner if you have intentions to start another limited company.
Please call for an informal chat on 0345 260 0101 and ask to speak with either Jeremy Frost or Patrick Wadsted. We cover the whole of the UK and look forward to working with you.
We also have a range of other business services including MVL products, commercial mediation and business restructure.
Qualifying criteria:
No more than 2 directors
and 2 shareholders
No ROT
No employees
No assets
No finance agreements
No pensions
No overdrawn directors loans
Up to 10 creditors
Prices start from:
Plus disbursements and VAT
Qualifying criteria:
Assets over £5,000
Yes to finance agreements
and warranties
Yes to pensions
Yes to employees
Yes to creditors
Prices start from:
Plus disbursements and VAT
Qualifying criteria:
Fixed Assets including
property and lease
Large creditor claims
Complex creditor claims
Pending litigation
Shareholder and
director disputes
Bespoke advice
Prices start from:
Plus disbursements and VAT
Our team member below will be able to help with all your questions
At Frost Group, we want to make things as easy as possible for you. That is why, if you can’t come to us, we’ll come to you. We operate face to face, nationwide meetings, wherever is most convenient for you.
Court House,
Old Police Station South Street,
Ashby de la Zouch LE65 1BR
0345 260 0101
enquiries@frostbr.co.uk
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