insolvency liquidation
A creditors’ voluntary liquidation or CVL is appropriate where a company is insolvent and is not capable of being rescued, usually because its underlying business is no longer considered viable.
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A company is considered to be insolvent under English law if it is unable to pay its debts. There are two tests for insolvency:
- the cash-flow test: is the company currently, or will it in the future, be unable to pay its debts as and when they fall due for payment?
- the balance sheet test: is the value of the company’s assets less than the amount of its liabilities, taking into account as-yet uncertain and future liabilities?
If you believe your company to be insolvent, or believe that it will become insolvent, steps must be taken to mitigate the impact this will have on your outstanding creditors.
With the assistance of an insolvency practitioner the directors will convene meetings of the company’s members and creditors. At these meetings resolutions will be considered that the company be wound up voluntarily and that a liquidator be appointed.
The principal role of the Liquidator is to realise the Company’s assets and if sufficient funds are received, to agree creditors’ claims and distribute the proceeds in accordance with their legal priorities.
If you would like to find out more about a Creditors’ Voluntary Liquidation then please contact us for a no obligation discussion to find out how our services could help you.
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