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CVLA CVL is the most common method of placing a company into liquidation. It is quick and generally simple to commence, and deals with all creditor claims in a single process. Employees can be dismissed and claim redundancy pay, and directors can hand over all the affairs of the company to an experienced liquidator, a qualified Insolvency Practitioner, leaving themselves free to get on with a new business or job, The liquidator can sell assets (if any), without the risk of challenge that an insolvent company would face before liquidation, and disclaim onerous contracts such as leases.  The process will ultimately bring the company to an end.

Directors have a primary duty to act in the best interests of the Company, however, once they become aware, or should be aware, that the Company is in an insolvent state this changes.  Then their duty is to act in the best interests of the creditors generally.
A company is insolvent if:

  • It is unable to pay its debts as they fall due.
  • Its assets are less than the amount of its liabilities, taking into account its contingent and prospective liabilities.

The alternative is to allow creditors of the company to wind it up the Court, known as compulsory liquidation.  In that case directors must co-operate with the Official Receiver (working for the Insolvency Service of the Department of Business, Enterprise and Regulatory Reform) in a detailed investigation into its trading.  In either case, a Liquidator has a duty to investigate the affairs of the company and consider the actions of the directors. If the directors have continued to trade the company after they are aware, or ought to have concluded, that it is insolvent, they may be exposed to personal liability for any loss to the creditors. There is an additional requirement to report under the Company Directors Disqualification Act 1986, which the Official Receiver deals with in compulsory liquidation, and the liquidator in a CVL.  Therefore if you are the director of an insolvent company you should not delay in taking advice. We at Guardian Business Recovery LLP will advise the directors on the best way to proceed. This may involve a restructuring or refinancing of the company or, as a last resort, to liquidate the company. Initial advice is free and without obligation. The process:

  • Directors pass a board resolution to convene an extraordinary meeting of members (EGM) to consider a resolution to wind up.
  • A Statement of Affairs is prepared and sworn by the Directors.
  • The EGM is convened and members pass a resolution to appoint a Liquidator.
  • A Meeting of Creditors is then convened to ratify the members’ appointee or to appoint an alternate Liquidator.

We at Guardian Business Recovery prepare all the necessary paperwork and work with the directors and shareholders throughout the CVL process, and are available to discuss and deal with any issues that arise. Once the Liquidator is appointed he has a duty to:

  • Realise the assets of the company
  • Make distributions to creditors, where there are sufficient assets.
  • Investigate the company’s affairs.

Reasons for electing to place the company into a CVL include

  • Where the directors have identified that the company is insolvent
  • Where the Directors have concluded that the company cannot avoid becoming insolvent
  • When the directors of the company wish to wind it up, but are unable to swear a “declaration of solvency” (See MVL).

Please call Mark Bassford FCA or John Paylor on 020 7002 7830 if you are the director or shareholder of a company and believe that it is insolvent, or would like further advice. Alternatively ask your company’s existing professional advisors to contact us to discuss the options available

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