A CVL is a voluntary liquidation process which is initiated by the director(s) of a distressed limited company. Many company directors choose to place their company into liquidation when it is clear it has no future. By doing this, directors are protecting the interests of the company’s creditors and helping to mitigate any further losses, as per their legal duty as the director of a knowingly insolvent company.
The alternative is that a company is forced into compulsory liquidation. This would happen when outstanding creditor(s) petition the courts for the company to be wound up. In compulsory liquidation, a Winding Up Petition would be served on the insolvent company, and if the company is not in a position to defend this or settle the outstanding liability, the court will order that the company is wound up. The Official Receiver would be appointed who would set about identifying company assets and conducting an investigation into the conduct of the company’s directors.
As a formal insolvency process, a CVL can only be entered into under the guidance of a licensed insolvency practitioner who will adopt the role of the company’s liquidator.
One of the main benefits of trading as a limited company is that directors are given the protection afforded by limited liability.
Whether a CVL is appropriate for your company depends on a range of factors including the financial position of the company, the likelihood of the business being able to return to a profitable position, and the desire of its directors to effect a recovery.
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If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.
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