What are your duties as a director before, during and after a Creditors Voluntary Liquidation (CVL)?

A CVL can begin relatively quickly once the decision has been made and a liquidator is appointed. From that point, the company is in a formal liquidation process and the insolvency practitioner takes control of dealing with the company’s affairs, including its assets and creditor claims, so directors are no longer trying to manage those issues in the normal course of business. The full liquidation usually takes longer, because the liquidator must finish winding up the company’s affairs before the company can be dissolved. Once the final account is filed, the company is normally dissolved three months later.

A CVL is a formal insolvency process used to close an insolvent limited company. It is usually considered when a company can no longer pay its debts and there is no realistic prospect of recovery. For directors, a CVL can provide a structured way to deal with the company’s debts, bring creditor pressure to an end, and close the company properly with a licensed insolvency practitioner appointed to handle the process.

A CVL can provide a formal way to close a company that cannot pay its debts and is no longer viable. It can help by taking the process out of day-to-day firefighting, putting a licensed insolvency practitioner in charge, and dealing with the company’s debts and closure through a proper legal process. However, a CVL also has drawbacks, including the company being closed, possible employee redundancies, and some personal liabilities may still remain.

A personal guarantee does not usually fall away just because your company enters CVL. The liquidation deals with the company’s position, but a personal guarantee is your own separate promise to repay a debt if the company cannot. If you have signed one, the creditor may still be able to pursue you personally even after the company has gone into liquidation.

Yes, in some cases it is possible to buy back some or all of the business or assets after CVL. However, this is not something directors can simply do themselves once the company enters liquidation. The liquidator manages this process, and any sale must be handled properly, at the right value. For directors, the practical point is that buying back the business or assets may be possible, but it has to be done through the liquidator and structured correctly.

When a company enters a CVL, it is placed into a formal insolvency process so it can be closed properly. A licensed insolvency practitioner is appointed as liquidator to deal with the company’s affairs, which may include gathering information, realising assets, notifying creditors, and bringing the company to an orderly close. For directors, a CVL provides a structured way to deal with an insolvent company where there is no realistic prospect of recovery.

The cost of a CVL will depend on your company’s circumstance, there is not one fixed fee in every case. A smaller, more straightforward company will usually cost less to place into liquidation than a larger or more complex one. The fee reflects the work involved in dealing with the company’s affairs properly through a formal insolvency process, rather than simply filing paperwork.

You should consider a CVL for your company when it can no longer pay its debts and there is no realistic prospect of recovery. This may be the case if HMRC arrears are building, creditor pressure is increasing, legal action has started, or the business is only continuing by delaying payments it cannot afford to meet. For directors, taking advice at this stage can help you understand whether a CVL is the right option and reduce the risk of the position getting worse.

When a company enters a CVL, employees are usually made redundant because the company is being closed. They may be able to claim certain statutory payments, including redundancy pay, unpaid wages, holiday pay and statutory notice pay, subject to eligibility and statutory limits. If the company cannot pay those amounts because it is insolvent, qualifying claims are usually made to the Redundancy Payments Service (RPS). In some cases, where the business or assets are sold and trading continues through another company, employee rights may be affected by TUPE, but that will depend on the circumstances.

Yes, in most cases, a director can start another company after a CVL. A CVL does not automatically stop you from being a director or being involved in a new business. In some cases, it may also be possible to buy some or all of the old company’s business or assets from the liquidator and continue trading through a new company. However, there are important rules around reusing the old company name, and staff transfer issues may also need to be considered where the business continues in a new structure.