CVL Timeline: How long does a Creditors’ Voluntary Liquidation take?

A creditors’ voluntary liquidation (CVL) is a legal process a company can undertake if it becomes insolvent. This means it’s unable to repay its debts to creditors and shareholders and there is no possibility of improving the fortunes of the company in the future.

In these circumstances, a company cannot legitimately continue to operate. The business must be closed, and its assets liquidated to repay its debts.

How Long Does CVL Take?

If your business is failing and your creditors are pressing, you’ll want the situation resolved quickly, so how long does voluntary liquidation take? This depends on the size and complexity of your company and its problems.

Generally, you’re looking at anything from three months (minimum) to one year or longer in more complex cases. Reviewing the stages of the CVL process gives you a clearer view of the creditors’ voluntary liquidation timeline.

What Is the Process for a Creditors’ Voluntary Liquidation (CVL)?

Step 1: Company Directors’ Assessment

After assessing the current state of the business, the directors conclude the company cannot repay its debts or improve its trading position. The directors can propose a CVL if the company shareholders agree.

At this stage, there is no obligation to engage an insolvency practitioner (IP) but it’s highly advisable to get an impartial opinion before proceeding. An experienced IP will assess your business to determine whether it has a viable future.

Assuming a CVL is the best solution, an IP helps you prepare a plan of action to present in forthcoming meetings.

Step 2: Board Meeting and Voting

Directors and shareholders meet to discuss and vote on the proposal to proceed with a CVL. A minimum of 75% of shareholders must agree to the CVL proposal for the ‘winding-up’ resolution to be passed. The company is then placed into liquidation.

The directors must advise Companies House of the ‘winding-up’ resolution no later than 15 days after the meeting. An official public record should also be made by placing a notice in The Gazette.

Step 3: Creditors’ Meeting

All creditors must be advised of the CVL within 14 days of the ‘winding-up’ resolution being passed. This is usually a virtual meeting, and creditors can question directors and suggest an alternative IP if they wish. Creditors must also provide proof that money is owed to them.

Creditors Voluntary Liquidation Timeline – Stage One

For a small company, steps 1,2 and 3 can take approximately 21 to 28 days – assuming a relatively simple financial situation and a small to medium number of creditors. For large businesses with many creditors and assets to consider, steps 1,2 and 3 may well take longer.

Step 4: Appointing a Licensed Insolvency Practitioner (IP)

Under the Insolvency Act of 1986, you are legally obliged to appoint an insolvency practitioner at this stage if you haven’t done so already. They will act as liquidator and administer the whole process.

Step 5: Liquidation Process

The liquidator (IP) now takes over the running of the company from the directors. All company records, reports and financial details are moved to the liquidator’s office, and it’s their responsibility to close the business. This involves the following:

• Collecting any outstanding debts.
• Investigate creditors’ claims for payment.
• Selling the company assets for the best possible price.
• Distributing the proceeds to eligible creditors.
• Resolving any outstanding legal disputes.
• Terminating company contracts (including employment contracts).
• Distributing any remaining funds to shareholders if there is a surplus after all debts are repaid.
• Investigating the company directors and their running of the business to ensure they have acted correctly. Serious mismanagement or fraud is rare but if it does come to light directors may be held personally liable for the company’s debts and barred from standing as directors again.

Step 6: Final Closure

Once Step 5 is complete, the insolvency practitioner informs Companies House, and the company is removed from the Register. The business is now closed, and the liquidation process is complete.

Creditors Voluntary Liquidation Timeline – Stage Two

So, how long does a voluntary liquidation take? Step 4 is straightforward – contact Irwin Insolvency where our experienced IPs are ready to advise you.

Step 5 can take up to six months for a small company. For a larger organisation this could be a year or more.

How Long Does Voluntary Liquidation Take? Ask an Insolvency Practitioner

For clear guidance and a free consultation contact Irwin Insolvency today.