Creditors Voluntary Liquidation - Explaining the Process
What happens during a CVL?
Going through the process of liquidation is a potentially life-changing and sometimes stressful event, so it really helps if you fully understand what will happen. It’s probably best to think of it as a series of steps. These are little milestones along the journey that will help you relate to the process.
From the moment we meet for our first discussions, we are obligated to follow legal and ethical guidelines. Some are more formal than others, but all of them are important, so we will always keep you fully up to speed about what is happening and when.
- We have our Initial Meeting.
Knowing where we are starting from is a very important first step. Normally we can set up these meetings very quickly, sometimes on the same day as your initial call. The initial meeting is free of charge, totally confidential, and you are under no obligation to move forward. In fact, we will not move on to the next stage unless everyone is agreed it is the right decision. This initial meeting can be face to face or online. The purpose is to discuss the company’s position, explain the options available, and deal with any questions or concerns.
- We start to gather the information we need.
Once we are sure we can help you and it is the right thing for you and your business, we use an in-depth questionnaire that will give us the information we need to begin the liquidation process. It is very thorough because we need to have accurate information on which to move forward so you will need to think about the content carefully.
- There now needs to be a formal Directors’ Meeting.
The directors meet and agree to place the company into liquidation as well as sign all the relevant paperwork to facilitate the next stages. It depends on the number of directors and complexity of the liquidation, but often this is quite a short meeting.
- Preparation of the Statement of Affairs and Report.
The directors are required to send a Statement of Affairs and report to all creditors. We will be there to assist you with the preparation of these documents. Once completed we then send them to your creditors.
- The Shareholders’ Meeting.
This is normally held shortly before the creditors’ meeting or deemed consent process (detailed below). One of the directors will be nominated as the chair and the shareholders vote to place the company into liquidation and appoint the liquidator. The shareholders’ meeting, in most cases, is straightforward, as the directors and shareholders are often the same.
There are, in effect, one of two processes that can be followed. These are either a virtual creditors’ meeting or a deemed consent procedure.
A Virtual Creditors’ meeting allows creditors to attend and ask questions. In our experience, about 95% of all cases have no attendance and last around 15 minutes. Even in cases where creditors attend, they are normally finished within an hour.
Deemed Consent is exactly as it sounds. We write to all creditors and, if they do not object by a set date, it is deemed that the company has gone into liquidation on that date.
In overview then, after being appointed the liquidator has 3 main roles:
- To realise the assets of the business
- To agree the creditors’ claims
- To review the directors’ conduct
I appreciate that the above sounds like a long and difficult process. However, our role is to help and guide you, so we will be there from start to finish as you go through the process. Time scales vary, but moving from the initial meeting to the Decision Process will commonly only take 3 to 4 weeks. Once the liquidator is appointed, the liquidation can take between 9 months and a couple of years, depending on the size of the business and what needs to be done. However, your involvement will be limited during this time and we will, of course, be there to help and guide you at every stage.
