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A Creditors Voluntary Liquidation (CVL) is when the directors of a business, its shareholders or sometimes its creditors make the decision to close it through a liquidation because it cannot pay its debts in a timely manner.

As a formal legal process, it has to be completed by a licensed insolvency practitioner but can take as little as two weeks to complete from engagement to completion depending on the circumstances.

There are many reasons why your clients could contemplate closing their business down or it might be the conclusion you’ve reached but there are still several hurdles to be overcome before this happens.

This is why it’s best to work with experts who have overseen hundreds of CVLs through to a successful conclusion.

Find out more about how we handle Creditors Voluntary Liquidations here. 

Not every company that closes is insolvent.

Some are very successful and profitable but for various reasons the directors or shareholders might decide that it’s time to turn the page and close the doors.

The most effective way of doing this for a solvent business is through a Members Voluntary Liquidation (MVL).

If it can reasonably clear its debts within 12 months and has £25,000 or more of assets to distribute to shareholders then if one of your clients meets this criteria then they could be a prime candidate for an MVL process.

It’s a formal legal process so requires a licensed insolvency practitioner to oversee it but the usual advantages apply for your clients in terms of control, speed and certainty.

We’ve also saved the best news until last – closing via an MVL is also the most tax efficient method.

Shareholders can treat final distributions as capital distribution not profits. They would also be able to apply Business Asset Disposal Relief (BADR) to their Capital Gains Tax liability but you know more about that side of things than us.

Either way, it’s a great arrangement for them, you and us.

Find out more about how we look after Members Voluntary Liquidations here.

Increasing debt levels, poor cash flow, management and worsening economic conditions do not automatically mean that insolvency and liquidation are inevitable.

In many cases and if advice is sought early enough in the process, then restructuring and recovery procedures can be deployed which mean the business has a fighting chance to survive and eventually thrive again.

If your clients main hurdle to profit is making their monthly debt repayments in full and on time then it might make more sense to tackle these debts holistically.

A CVA is the tool insolvency practitioners use to do this.

It’s a formal agreement reached between a company and its creditors where a negotiated proportion of the total combined debt is written off and in return the business promises to repay the remaining debt in regular, affordable monthly repayments.

This will give them more immediate cash in the short and medium term, allow the creditors to receive most of their money back and at the end of the CVA period, the company can emerge debt free.

Not every CVA is successful but it can be a tremendous tool for your clients to get out from under a seemingly impervious debt burden.

You can find out more about how we arrange CVAs here.

If a CVA fails or if the problems at a client require a more complicated and serious response than writing off a proportion of debt then a full administration process could be the answer for them.

In insolvency terms, administration involves an external manager or administrator being appointed to take temporary control of the business from current management and see if they can reduce expenses and turn the business around from loss making into profit.

Another administration strategy could be for the administrator to oversee a “pre-pack” sale of the business to new owners or management who could then implement their own ideas and strategies to make it work successfully.

There are several immediate advantages to an administration including the suspension of all legal proceedings against a business.

An administrator can be appointed by current directors and shareholders (although under certain circumstances they can be appointed by floating charge holders and other creditors too).

Their job is always to protect the interests of creditors however and if a business can’t be saved or has a reasonable chance of returning to profitability then they would seek to close it and obtain the best return for creditors through the disposal of company assets.

Find out more about our administration expertise here.