What is Company Voluntary Liquidation?
This is the most common form of liquidation in use in England and Wales and brings to an end the operation of the company.
It is a common misconception to confuse the liquidation process with bankruptcy, with people often saying a company has gone bankrupt. Bankruptcy relates solely to an individual’s insolvency and should not be confused with the corporate equivalent that is liquidation.
If a business is insolvent and does not have enough money to pay its debts, sometimes the only appropriate course of action is to place the company into liquidation.
In spite of the title, it is the directors of the company who take the decision to place a company into Creditors Voluntary Liquidation, or CVL for short.
We appreciate the stresses and strains that directors face when a business is struggling and is on the verge of failing. Harrisons relieve that pressure by taking control of the company and dealing with all the creditors direct.
It is important to remember that in the majority of cases, a company’s debts stay with the company. There are a few exceptions to this, mainly where personal guarantees have been given to company creditors.
In such circumstances it is even more crucial to obtain professional advice early, not only to safeguard the position of the company, but that of the guarantor.
The costs associated with placing a company into CVL are in most cases paid from the realisation of the company’s assets.
Harrisons can advise and assist directors to ensure they meet their obligations should their company become insolvent, assist in placing the company into liquidation and act as liquidators.
Where a company is insolvent, directors should also seek professional advice as early as possible to safeguard against potential legal actions against them such as:
- Transactions at undervalue
- Wrongful trading
- Fraudulent trading
- Transactions defrauding creditors
- The re use of a same or similar company name