If, as a director, you decide that the company can no longer meet its liabilities and so cannot continue to trade you have several options. One is Creditors Voluntary Liquidation (CVL). CVL is the most common form of liquidation in England and Wales. If you find yourself considering your options you should always seek the specialist advice of a licensed Insolvency Practitioner (IP).
Once, having taken the advice of an IP, you believe that a CVL is the most appropriate route the directors will need to resolve to wind the company up, propose a chosen IP to act as liquidator and call a meeting of the shareholders. At this stage (and maybe even before) the company should cease trading so that no further debts are incurred and all assets should be safeguarded.
The IP will work with you to prepare a formal report and statement of affairs of the company. These will be presented to creditors.
The IP will convene a meeting of creditors to confirm the liquidation, but at that stage will take over the contact with the creditors. This will help release you from the stress of dealing with creditors and allow you to start planning for the future.
There will be two meetings to confirm the liquidation. The shareholders meeting to resolve to wind the company up and appoint a liquidator. In normal circumstance the meeting of creditors will be held immediately after the shareholders meeting.
Whilst a director will need to attend and chair the meeting the IP will be there to assist, and in effect “run” the meeting.
There will be vote at the creditors meeting regarding confirming the appointment of the IP as liquidator, at this time the creditors can vote to appoint another IP as liquidator by simple majority over 50%.
On confirmation of appointment the liquidator has many duties to carry out including (but not limited to):
- Safeguarding and realising the company’s assets
- Dealing with any employee claims
- Dealing with creditors regarding the progress of the liquidation and potential dividends
- Carrying out statutory investigations into the company’s affairs and conduct of the director(s)
- Submitting a conduct report to the insolvency service outlining the results of investigations
- Agreeing creditors claims and where possible paying a dividend
If you believe that a CVL may be appropriate you need to consider taking advice, sooner rather than later. The IP may be able to provide a solution that turns the position around, but is this is not the case then you must not take steps that make the position of creditors worse and early action can prevent this.
If you think a CVL may be right for your company, contact us today to arrange a free confidential, no obligation consultation.