Cost Effective, Value for Money, Creditors' Voluntary Liquidation Services

In these extraordinary times with the post Pandemic recovery of many industries now beginning to be hampered by increases in energy prices, interest rates, tax rates and inflation, many directors of companies will face some difficult questions and decisions. Can their companies afford the repayments due on their Bounce Back and/or CBIL loans? Will their landlord tolerate any more arrears? How many years could it take their businesses to recover before they may see their own livelihoods and finances restored?

For those who exhaust the prospects of a turnaround, subject to taking professional insolvency advice, a Creditors’ Voluntary Liquidation may be the most appropriate option, as it would not only protect the position of creditors as well as employees, but also the position of the directors. Early action could prevent trade and crown creditors suffering greater losses than necessary; the bank position deteriorating further and minimise the possibility of the directors facing any claims under personal guarantees or losing more of their own money, particularly if borrowed personally to inject in the business.

The CVL route is usually the last voluntary resort for a company, as it is insolvent, in that it is unable to pay its debts when they fall due and cannot continue trading.

Sterling Ford have often used the CVL procedure as part of a restructuring solution, to preserve business undertakings, maximise realisations and returns to creditors; in achieving full and final commercial settlements between associate entities, particularly in highly regulated industries such as financial services/markets.

What is the Creditors' Voluntary Liquidation procedure?

Subject to a Company's director(s) being advised that a CVL is the most appropriate procedure for their insolvent company, the following steps would be taken:

Step 1

A Meeting of Director(s) would be held, which would resolve, inter alia, that the Company ceases trading, and a Meeting of Members be convened for the purpose of passing a special resolution to place the Company in liquidation and to nominate a licensed insolvency practitioner for the appointment as liquidator. The Director(s) would also convene a Decision Procedure for the purpose of confirming the appointment of the Company's nominee as liquidator, which could be, for example, by Virtual Meeting or by Deemed Consent. Notice of the Meeting of Members would be sent to members and Notice of the Deemed Consent procedure, if being used, would be sent to creditors, together with, inter alia, a copy of the statutory Statement of Affairs with a Statement of Insolvency Practice 6 (SIP6) Report.

Step 2

If less than 10% in value of creditors object to the Proposed Decision the creditors are to be treated as having made the Proposed Decision and the Company's nominee as liquidator is deemed to have been appointed the Liquidator of the Company.

If using the Deemed Consent procedure 10% or more of creditors by value of their claims object to the Deemed Consent procedure/the proposed Nominee's appointment as liquidator, then a Director must convene a physical Meeting of Creditors. At the physical Meeting of Creditors, either the Company's Nominee would be confirmed as liquidator or another insolvency practitioner would be appointed instead.

Step 3

The liquidator would communicate with members and creditors to notify them of his appointment and to invite creditors to lodge their claims, advertise the Resolutions to wind up the Company and his appointment and file such documents as well as the Statement of Affairs/SIP6 Report at Companies House. The liquidator would bond (insure) the assets comprised in the liquidation estate, based on the estimated realisable value of those assets reflected in the Statement of Affairs. The liquidator's duties include: investigating the conduct of the directors and cause of a company's failure; and cost effectively maximise realisations, agree creditors' claims and distribute.