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What are the advantages of Creditors’ Voluntary Liquidation?

16th Apr 2014
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What are the advantages of Creditors’ Voluntary Liquidation?

The main advantages of a Creditors’ Voluntary Liquidation (CVL) are:

  • You are taking control of a difficult situation – rather than living in fear of things happening to you
  • You are acknowledging your legal duties as a director to your creditors – e.g. avoiding a risk of “wrongful trading”
  • You get to appoint the Insolvency Practitioner (IP) who you want to do the liquidation – so you are able to influence things like what date to have your statutory meetings
  • The whole process can be done from the comfort of your own office (assuming you appoint an IP who has the facility for on-line meetings)
  • You can appoint a RICS valuer to give you a professional and independent value of the assets of the business. These can then be purchased from the liquidator if you wish to restart. And, because you have employed independent professionals, you cannot be accused of committing a transaction at an undervalue
  • It is a cost-effective way of formally shutting down a business to ensure that nothing can come back to “haunt you” – e.g. any unknown bills due to the Revenue dating back several years

What a Creditors’ Voluntary Liquidation (CVL) is not...

You may have heard it referred to as "winding up a company". However, this term actually refers to a ‘Compulsory Liquidation’ - which is done by the High Court following a Winding Up Petition by a disgruntled creditor who has not been paid.

By letting your company go into Compulsory Liquidation, it is important that you understand what the effects will be on you:

  • It is very likely that your future credit terms from lenders with be adversely affected
  • Professionals (e.g. banks & other lenders, accountants and solicitors) take a dim view on directors / business owners who take this course of action
  • At best, you will be viewed as someone who has been complacent and reckless with regards to your fiduciary duties.
  • At worst, they will think you are a rogue.
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