Close your company with a
Creditors' Voluntary Liquidation

Perfect for an insolvent company with debts or cashflow problems




Creditors Voluntary Liquidation

What is a Creditors'
Voluntary Liquidation?

In the event a company can no longer repay its debts and other liabilities, it is considered insolvent. Directors of such companies must carefully consider their next steps, and assess whether recovery is possible. If not, directors may need to consider insolvency procedures.

Creditors’ Voluntary Liquidation (CVL) is one such procedure. It is a form of voluntary liquidation, one that specialises in addressing the needs of insolvent companies. With the assistance of a licensed insolvency practitioner, directors can utilise a CVL to reach an effective solution to their company’s debt, ensuring the issue does not spiral further.

Creditors’ Voluntary Liquidation is a formal insolvency procedure intended for insolvent companies. Its primary aims are:

  • winding-up of a company
  • repayment of its creditors, as far as possible
  • fulfilling the legal obligations of the company’s directors.

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Given the finality of a CVL, it is typically used for situations where a company is terminally insolvent – i.e. has considerably more debts than assets, and no viable hope of turning the situation around.

As a voluntary procedure, a CVL can be initiated by directors once 75% of the board has approved. With this approval, an insolvency practitioner can be appointed by directors to the role of liquidator. The liquidator will carry out the procedure, relieving directors of their responsibilities over the company.

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Client testimonials

The whole team at Clarke Bell is very prompt and helpful. The liquidation process for my company was very smooth and hassle-free. Look no further...

Umesh Singh

I needed to dissolve my company at short notice and approached Clarke Bell on the recommendation of my accountant. They were good communicators at all...

Robert Raine

Quick to respond, efficient and friendly. Just the service I wanted for my MVL. Their process guided me through the paperwork and actions I needed...

Eric Lomas

I'm very happy with the service I received from Clarke Bell in handling my Member's Voluntary Liquidation (MVL). They communicated clearly with me throughout, always...

Mark Whitaker

I used Clarke Bell Ltd following a recommendation from another accountant as a specialist for the liquidating work I required undertaking for my business, Fior...

Noel Kenny

I recently used their services to liquidate my company via MVL. The whole process was quick and easy (lot's of digital paperwork tough as that...

Gyula Borbély

Excellent service, staff have been brilliant in guiding us through this process. Any questions we had were answered clearly and quickly. The team are all...

Clive Hastings

Is my company insolvent?

A company is considered insolvent when its total owned assets are of lower value than its outstanding debts and other liabilities. Equally, if a company cannot afford to repay its debts as they come due, it will be considered insolvent.

If your company meets either of these criteria, then it will be considered insolvent. However, insolvency does not mean that a company’s fate is sealed. It is entirely possible for insolvent companies to recover and return to solvency. This typically requires good leadership and a solid business model, although external assistance can sometimes be enough to get a company back on track.

While insolvent companies can recover, it is a different story for terminally insolvent companies. A company can be considered terminally insolvent when it meets the previous criteria, but lacks a reasonable path to solvency. Examples can include a non-viable business model, a dramatic decrease in custom, or any other factor that could impede a company’s attempts at improving income and lowering outgoings. As a terminally insolvent company cannot hope to recover, directors must explore insolvency procedures immediately. Failure to do so could be seen as misconduct.

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Creditors Voluntary Liquidation
Creditors Voluntary Liquidation

Who can put a company into liquidation?

Regarding Creditors’ Voluntary Liquidation, directors are able to place their company into the procedure at any time with at least 75% of the board’s approval. This will usually be done when directors have identified a company as insolvent, and a path to solvency is unclear.

As a voluntary procedure, a CVL affords directors some flexibility and benefits that aren’t afforded elsewhere. The ability to appoint an insolvency practitioner and a display of initiative are two such examples.

(This is not the case for compulsory liquidation. True to its name, compulsory liquidation is forced upon a company, and is typically a much less favourable procedure than any voluntary form of liquidation. To ensure directors, employees, and creditors alike reach a favourable outcome, voluntary liquidation should be prioritised.)

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What happens during a CVL?

The main objectives that a CVL aims to achieve are the liquidation of the company, the repayment of its creditors and the investigation into company finances. Each of these objectives will be pursued in sequence, beginning with the disposal of assets and repayment of creditors, and ending with the wrapping up of all a company’s affairs.

The CVL process

The CVL process begins with the approval of at least 75% of the board. With this approval, an insolvency practitioner can be appointed to enact the CVL procedure. With the appointment of an insolvency practitioner to the role of liquidator, a series of meetings must be held. These meetings will involve directors, shareholders, and creditors alike, aiming to inform all parties of the company’s financial state. During these meetings, each party must approve of the upcoming liquidation in order for it to begin unimpeded.

With the meetings held and approval gained, the liquidator can take centre stage. The liquidator will assume full control over the company, and directors will relinquish their influence over company affairs. This will allow the liquidator to act swiftly, and unilaterally.

The first order of business for a liquidator is the identification of any company assets. Each asset held by the company must be officially appraised and documented, ensuring no asset is left unaccounted. These assets will then be sold for the highest possible price, with the proceeds being distributed amongst the company’s creditors. Once all assets are disposed of, the company will be formally wound up and removed from the Companies House register.

As part of the liquidation process, the liquidator will investigate the company’s finances and the directors’ conduct. This is typically only a formality aimed at ruling out the presence of misconduct. However, there are some instances where directors do place their own interests above those of their company’s creditors. This investigation aims to see if there is any evidence of this. Should any evidence be found, it will be forwarded to the Insolvency Service for potential legal action.

CVL timeline

The circumstances of insolvent companies are rarely the same. While they may share the same fundamental issue, the specifics of each company can vary. For example, large companies with complex assets and liabilities will take much longer to liquidate than small companies with modest, straightforward accounts. As such, it is difficult to estimate how long a CVL will take, without knowing the specifics of a case. However, a generalisation can be given for each step of the CVL procedure to create a frame of reference.

The first step is the appointment of the insolvency practitioner and the series of meetings. Gaining the board’s approval can be quick for a small, tight-knit group of directors. However, a large and disunited board can be the first delay of many. The same can be true for the appointment of a liquidator, as disagreements within the board can extend this part of the process. The directors’ meeting can be called immediately, and is typically the swiftest meeting to hold. Both shareholders and creditors are entitled to several weeks’ notice. However, if 90% of shareholders sign a “consent to short notice”, then the shareholder meeting can be brought forward. All in all, these meetings can be expected to take around one month, though this can vary.

After the appointment of a liquidator and the necessary meetings, the company’s liquidation can begin in earnest. This will begin with the appraisal and documentation of assets, and end with the distribution of any proceeds amongst creditors. This stage tends to take the most time, though exactly how much time depends on your company’s assets and liabilities. A large company may take quite some time to properly record every asset, find suitable buyers, and release the funds to creditors according to a repayment hierarchy. Alternatively, a small company with fewer assets and liabilities will likely take much less time due to a lesser degree of complexity. In either case, this stage of the process is typically the most time-consuming.

The repayment hierarchy is fixed, though not every step will apply to every company. There are a total of five steps that the liquidator will follow:

Secured creditors with a fixed charge

This refers to creditors with an unvarying charge, such as banks with a secured loan against property.

Preferential creditors

Certain creditors, such as employees owed wages, will be classed as preferential creditors. Such creditors will be paid second after all fixed charge creditors are paid.

Secured creditors with a floating charge

Third in the hierarchy are floating charge holders. These creditors secure a loan against flexible assets, such as stock, equipment, and other sellable assets.

Unsecured creditors

Unsecured creditors are one of the most common creditors, referring to lenders that do not secure loans against physical assets. These creditors are fourth in line to be paid, and often go without, as insolvent companies usually cannot afford repayments.


The final group in the repayment hierarchy are shareholders. Shareholders may only receive any funds once all other creditors have been fully repaid. In the case of insolvent companies, shareholders will not receive a distribution as such companies, by definition, cannot pay all their creditors.

Once all distributions have been made, the liquidator will have the company wound up and open an investigation into director conduct. This investigation can vary in duration. Should the case be clear that director misconduct was not the cause of failure, then the investigation can be wrapped up swiftly. However, if evidence is uncovered, then a deeper investigation may be required, taking much more time and demanding additional steps.

Assuming your situation is straightforward in each step of the procedure, a CVL can take a minimum of 3-4 months. However, we find that an estimate of 12 months is more typical.

Creditors' Voluntary

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How much does a CVL cost?

The cost will also vary depending on the complexity of the case. Clarke Bell offers a highly affordable CVL service compared to other providers.

Things to consider with a
Creditors' Voluntary Liquidation (CVL)

Getting the best for all the stakeholders

It is vital to balance the needs of the company director(s) with the duties owed to all the stakeholders who are involved with the company (including employees and creditors).

As Licensed Insolvency Practitioners we ensure this balance is achieved.

Doing it correctly and legally

Clarke Bell act within the law to help you deal with the insolvency and help you move forward.

Crucially, you can do all of this without having to look over your shoulder – because you will know that everything has been done correctly and legally.

What it is not...

A Creditors’ Voluntary Liquidation (CVL) should not be confused with a ‘compulsory’ liquidation.

A compulsory liquidation is a process by which the court appoints a government official to take control of your company because you have failed to pay your debts and are clearly insolvent.


One of the duties of an Insolvency Practitioner in corporate insolvency is to conduct a “SIP 2 Investigation”. As part of this investigation, we are required to look into:

  • how the business was conducted
  • how trading was controlled
  • whether assets have been sold at an under-value or otherwise dissipated
  • the conduct of the directors
  • what assets there are (including potential claims against third parties, including the directors)
  • what recoveries can be made.

These investigations are proportionate to the circumstances of the case; and we report on the steps taken in relation to investigations and any outcomes.

(This is not something to be feared – unless you are deliberately trying to hide some misconduct. If this is the case, then we will not be able help you).

A director’s unintentional actions can be corrected

Occasionally we see a director who has done something they thought was acceptable, but in fact it is not permitted under the Insolvency Regulations. An example is paying one creditor “in preference” to their other creditors. This action will need to be rectified.

We will advise you how this can be done to ensure that you are complying with all the relevant Regulations.

How a Creditors’ Voluntary Liquidation works...

Step 1 - your free advice

When you contact us, you will get our expert advice on the best way for you to deal with your particular situation. This advice is free.

We can discuss your options by phone, e-mail, Skype or face-to-face at a mutually convenient location – e.g. your Accountant’s office.

Where there is a better option than a CVL (e.g. a Company Voluntary Arrangement), we will tell you.

Step 2 - our appointment


Once you instruct us, we will send you a Payment Request and a Letter of Engagement.

Before liquidation proceedings can commence the company needs to have ceased to trade and we must be in receipt of the following:

  • Two forms of certified identity for each director and all shareholders who hold 25% or more shares in the company
  • Completed History and Information Gathering Questionnaire
  • Completed Pension Questionnaire
  • A full list of creditors, including name, address, and amount outstanding
  • A full list of employees who have been made redundant (if required, we can assist with any redundancies)
  • Copies of the last 3 years accounts, if applicable.

We will prepare all the documentation that is required for the CVL process, and we will liaise with any required external parties (e.g. RICS valuers for valuing any company assets). Depending on the company’s Articles of Association, we are able to place the company into liquidation within approximately 7-14 days. Two Meetings are required to do this:

Step 3 - board meeting

At the Board Meeting, the company directors formally resolve the company is insolvent and cannot continue to trade. At this meeting the directors would also agree to appoint Clarke Bell as the liquidator of the company, as well as agreeing for the necessary Meeting of Members to be summoned.

The Board Meeting is generally held at the director’s home or office. Prior to the meeting, we will email you all the documents that you need.

Our attendance at this meeting is not required, but we are at the end of a phone if you need any help.

Step 4 - members' meeting

The Members’ Meeting is normally held approximately 14 days after the Board Meeting. (It can be convened at short notice, should the statutory percentage of members agree to this.)

It is at this meeting that the company is formally placed into liquidation.

The Members’ Meeting will be held at our offices. The company directors are required to attend. Again, we will supply you with all the necessary documents required for this meeting.

The company’s Books and Records should be provided to us prior to this meeting.

This meeting normally lasts 15 minutes.

At the completion of the meeting, your company is now in formal voluntary liquidation.

Creditors' meeting - decision by creditors

While the company is in liquidation with a liquidator appointed once the Members’ Meeting has been held, the creditors still have to ratify the appointment of the liquidator. Due to the new Insolvency Rules, since April 2017 there is no longer a requirement to hold a Physical Meeting of Creditors to ratify the appointment of the liquidator. The appointment can now be deemed as accepted, unless sufficient creditors object to this. This is the “Deemed Consent Procedure”. Alternatively, a “Virtual Meeting of Creditors” can be held where the creditors attend by conference-call rather than in person. Our preferred approach though is to use the “Deemed Consent Procedure”.

We keep a register of any objections. As soon as 10% of creditors who would be entitled to vote at a meeting object, then the deemed consent process automatically terminates and we have to convene a physical meeting.

It is also possible for creditors to requisition a physical meeting, but in order for one to be summoned it must be explicitly requested by either:

  • 10% of the total creditors (by value); or
  • 10% of the total number of creditors; or
  • 10 individual creditors.

This is known as the ‘10/10/10 threshold’.

Once this ‘10/10/10 threshold’ has been met, or if sufficient objections to the Deemed Consent Procedure are received, then within three days we will convene a physical meeting. We will notify the directors and they will be required to attend the meeting. While every effort will be made to ensure that it is held on the same day as the Members’ Meeting – for everyone’s convenience – that will not be possible if the request for a meeting or objections are received after the time of the Members’ Meeting. It is to reduce the chances of that happening that we hold the Member’s Meeting in the late afternoon, since creditors can object at any time prior to 23.59 hours that day.

In our experience, since the new Insolvency Rules were introduced, it is very rare that a Creditors’ Meeting is explicitly requested, although there are occasionally objections to the Deemed Consent Procedure.

Company Director Disqualification Act 1986

When a company gets into cashflow difficulties, some directors (wrongly!) choose not to pay the taxes that are due to HMRC – e.g. Corporation Tax, PAYE, VAT and NIC. The company does, however, continue to pay other parties (such as their suppliers). These payments may be considered to be ‘preferential’ payments, but are certainly to the detriment of HMRC. In the event of insolvency, this could lead to a director’s disqualification. In fact, this is one of the most common reasons for considering whether someone is unfit to be a director. Under the rules of the Company Director Disqualification Act 1986 (CDDA) a director can be disqualified for between two and 15 years.

As part of our investigation will look into this and other matters relating to the conduct of the directors and the affairs of the company. We are required by law to submit information to The Insolvency Service about the conduct of all those who have been directors, or shadow directors, of the company within the 3 years prior to liquidation. We have 3 months from the date of liquidation to submit the information.

Creditors Voluntary Liquidation

Director responsibilities

While directors relinquish much of their control over their company during a CVL, they still have a series of responsibilities to fulfil. These responsibilities include:

  • Cease trading immediately upon the discovery of insolvency.
  • Hold a shareholder’s meeting to inform of insolvency and next steps.
  • Inform shareholders of the decision to liquidate within five days.
  • Appoint a licensed insolvency practitioner to the role of liquidator.
  • Provide company accounts, records, and other documentation to the liquidator.
  • Participate in an interview as part of the concluding investigation. Directors must also comply with other requests during the investigation, if applicable.

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CVL vs. MVL: Solvent vs insolvent liquidations

While similar in name, Creditors’ Voluntary Liquidation and Members’ Voluntary Liquidation are quite different. A CVL is intended for insolvent companies, while an MVL is for solvent companies.

The first key difference is at the start of each procedure. Both solvent and insolvent companies must properly identify their financial states. Directors of solvent companies must swear a Declaration of Solvency, but insolvent companies have no such equivalent.

When the time comes for the appointment of an insolvency practitioner, creditors have some influence over the decision in a CVL. This is not the case for an MVL, where directors have total control over the appointment.

In a CVL, the liquidator will open an investigation into the conduct of the directors to check for any misconduct. Such an investigation is not required under an MVL, as the company is solvent.

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Creditors Voluntary Liquidation
Creditors Voluntary Liquidation

What are creditors’ rights in a CVL?

Creditors are afforded certain rights under a Creditors’ Voluntary Liquidation. Most notably, they have the right to receive repayment during the liquidation. The liquidator will make as many repayments as possible, following a repayment hierarchy. However, creditors have an additional set of rights that can be exercised during the Meeting of Creditors. In the event a creditor cannot attend this meeting, they can vote by proxy where voting is required.

While in the Meeting of Creditors, several rights will be afforded to creditors, including the following:

  • Creditors can vote on the appointment of a liquidator if they choose
  • Creditors are entitled to a Statement of Affairs, which details the company’s assets and liabilities.
  • Creditors are entitled to full disclosure of the company’s history prior to liquidation, all claims against it, and the status of the ongoing liquidation.
  • Creditors may inquire into director conduct at any time.


While some of these rights take effect immediately upon the commencement of a CVL, others must be exercised by creditors directly. As such, they do not have a fixed effect from case to case, and may be a more or less prominent factor in your company’s liquidation.

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Your options if your company cannot pay its bills

If you are the director of a company which can’t pay its bills – i.e. is insolvent – there are a number of options available to you, including:

do nothing, and hope it goes away. This approach rarely works as, when people are owed money, they will chase it up. You will then be under pressure waiting for something to happen. Then, when it does, it could involve a winding-up petition against your company and / or bailiffs paying you a visit. These are things that are best avoided.

borrow more money. Far too often directors borrow additional funds but end up in further trouble, and owing more money

take positive action and seek advice from a professional – i.e. your accountant and / or an Insolvency Practitioner. If an insolvency option is the best route for your company, it is most likely that it will be with a Creditors’ Voluntary Liquidation (CVL). These are the most common, with about 15,000 companies going into a CVL each year.

It is important to note, if your company is insolvent you cannot dissolve it by “striking it off”.