Advantages and Disadvantages of Creditors Voluntary Liquidation

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If the directors of a business have decided that a company is irretrievably insolvent, and therefore needs closing down, an Insolvency Practitioner (IP) may recommend a Creditors Voluntary Liquidation (CVL) as the best course of action to wind the company up.

Is Creditors Voluntary Liquidation right for your company?

Here we explore some of the advantages and disadvantages to company directors who choose this process. Advantages

• A quick and efficient way of bringing the company to a close.
• The process is driven by the directors who have more control in appointing an IP they are happy with.
• Can often bring an end to pressure from banks and other creditors (including HMRC), as the insolvency practitioner deals with creditor queries.
• The sooner the decision is made to begin the process, the less the risk of wrongful trading.
• Directors can start a new company afresh and will have the opportunity to buy assets back.

Disadvantages

• The company will need to close down and stop trading immediately (there are alternative processes available if this is not what you want e.g. Administration or Company Voluntary Arrangement [CVA]).
• Any personal guarantees will crystallise.
• Director conduct will be investigated and action potentially taken if inappropriate.
• The process can require a director contribution to costs if there are insufficient assets available.

Please refer online to learn how your business could be impacted and gain a deeper insight into the company liquidation process.

Need help from an Insolvency Expert?

If your company has become solvent and you would like advice on the next steps to determine the best course of action, speak to The Insolvency Experts. We can provide help and guidance through insolvency and help to retrieve assets or keep your business trading. Call us directly on 0300 303 8284. Alternatively, we’ll respond as soon as possible when you get in touch online.