Creditors’ voluntary liquidation
If your company can no longer pay its debts, a creditors’ voluntary liquidation (CVL) may be the most appropriate way to close the business in a controlled and orderly manner
Last Updated: 16/07/2026
Are you looking to liquidate your company?
We help directors understand their options, protect their position and deal with creditors fairly. Before recommending liquidation we always consider whether business rescue, restructuring or recovery options may still be available.
We work with all sizes and types of business from small to large corporates, allowing us to provide the level of expertise and tailored support each case deserves, avoiding the one-size-fits-all approach adopted by some firms.
What is a creditors’ voluntary liquidation?
If your business is suffering distress, then you may wish to use a creditors’ voluntary liquidation (also known as ‘CVL’) to shut down your business and effectively end trading.
A creditors’ voluntary liquidation is a formal insolvency procedure used when a company can no longer pay its debts. Unlike a compulsory liquidation, which is forced through the courts by creditors, a CVL is started by the directors and shareholders, giving you more control.
Key points:
- Directors and shareholders pass resolution to your choise of insolvency practitioner.
- A licensed insolvency practitioner is appointed to act as liquidator, and once he or she is appointed the directors are relieved of ongoing responsibilities.
- Company assets are sold and funds are distributed to creditors according to legal priority.
- Remaining unsecured debts are written off when the company is dissolved at Companies House.
- In some circumstances, directors may be able to purchase company assets and continue trading through a new company, subject to strict legal rules.
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We can provide you with advice and support on how to purchase your business after a CVL and start trading again. Part of our established process of implementing a creditors’ voluntary liquidation is helping you explore all the options to protect the value of your business.
Is my Company insolvent?
Directors must take action if they believe the company is insolvent. Insolvency is tested in two main ways:
- Cash flow test – Can the business pay its debts as they fall due?
- Balance sheet test – Do the company’s liabilities exceed the value of its assets?
If your company fails either test, it is considered insolvent and to minimise the risk of personal liability you should seek advice immediately. Continuing to trade when insolvent may increase the risk of personal liability which could make directors personally liable. At McTear Williams & Wood our expertise in business turnaround could still help you recover your business if you act quickly. See our top 10 frequently asked questions on creditors’ voluntary liquidation here >
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This free, easy-to-read guide is designed to help directors whose company is in financial distress. It will assist directors to navigate around insolvency issues and avoid potential pitfalls, split over ten sections this guide walks you through the matters in a logical order you are
likely to need to consider.
When should you consider a CVL?
A CVL may be the right solution if:
- HMRC arrears, supplier debts, or loan repayments have become unmanageable.
- Creditors are threatening legal action have issued a statutory demand or a winding-up petition.
- The company has lost key contracts or funding and cannot recover.
- You want to minimise the risk of personal liability if trading while insolvent.
How does a CVL affect company directors?
Directors play a crucial role in the CVL process and must fulfill specific responsibilities:
- Fiduciary duties – Directors must act in the best interests of creditors once the company is insolvent.
- Cooperation with the liquidator – They are required to provide all encessary information and assistant to the appointed liquidator.
- Potential personal liability – if directors are found to have breached their duties they may be held personally liable.
Benefits of a CVL
While a CVL can provide a controlled route to close an insolvent company, directors should also understand the practical consequences before making a decision.
- Controlled process – directors choose timing rather than being forced into court liquidation.
- Fair to creditors – assets are sold for fair value and distributed according to insolvency law.
- Legal protection – directors reduce the risk personal liability.
- Fresh start – potential to buy back company assets and continue under a new business.
What are the disadvantages of a CVL?
While a CVL can be beneficial, it also has drawbacks. Potential disadvantages include:
- The company will usually stop trading and be closed
- Company assets will be sold by the liquidator
- Employees are normally made redundant
- The liquidator must review directors conduct
- Personal guarantees remain the responsibility of any director who signed them
- Taking early advice can help directors understand these risks and avoid actions that could create further personal exposure
Selling to a connected party
Directors are legally permitted to buy back their business and assets in a creditors’ voluntary liquidation. We are able to provide you with advice and support on how to purchase your business after a CVL and start trading again. If you are looking to liquidate your company, call us today. At McTear Williams & Wood our expertise in business turnaround could still help you recover your business if you act quickly.
Directors are legally permitted to purchase business assets from a company in liquidation, provided the transaction is handled properly, assets are independently valued and preferably openly marketed and the sale completed in line with insolvency rules. This can allow viable parts of the business to continue trading under a new company. However, directors must take advice before using the same or similar trading name as restrictions apply.
See our top 10 frequently asked questions on creditors’ voluntary liquidation here.
Free advice line for distressed company directors > 08003317417
What happens to employees?
Employees are usually made redundant when a company enters CVL, This can be a difficult part of the process, but employees area able to claim certain statutory payments from the government’s Redundancy Payments Service. Including:
- Redundancy pay
- Unpaid wages (up to statutory limits)
- Accrued holiday pay
- Pay in lieu of notice
- Directors who are also employees of the company may be able to make claims too
We agree that it is important that claims are processed efficiently and quickly and unlike many insolvency firms who outsource this work we have a dedicated team who work with employees to ensure this happens.
What happens to creditors?
Once appointed the liquidator takes control of company assets and is responsible for realising value for creditors. Payments are made in a strict legal order, depending on the type of creditor and any security held:
- Secured creditors with a fixed charge
- Preferential creditors (e.g. certain employee claims)
- Secured creditors with a floating charge
- Unsecured creditors (suppliers, HMRC, customers, landlords, etc.)
Any remaining unsecured debts are written off once the company is dissolved. However, directors remain liable for any personal guarantees they have signed.
The CVL process – step by step
We follow a proven step-by-step procedure to quickly and efficiently manage the liquidation of your company during a creditors’ voluntary liquidation.
- Initial advice & assessment – We review your company’s position, including cash flow and balance sheet insolvency tests.
- Turnaround or rescue check – If recovery is possible, we’ll explore restructuring, refinancing, or a Company Voluntary Arrangement (CVA).
- Board & shareholder meeting – A resolution is passed to place the company into liquidation.
- Statement of affairs – Directors prepare a financial statement for creditors.
- Creditors’ decision process – Creditors are notified and given the opportunity to confirm or challenge the appointment of the liquidator.
- Liquidation of assets – The liquidator realises assets and distributes funds according to legal priority.
- Company dissolution – Once the process is complete, the company is struck off the register at Companies House.
Alternatives to liquidation
Liquidation is not the only option. If the business remains viable or there is still time to stabilise the position, alternative solutions may provide a better outcome. Before recommending a CVL we will consider whether any of the following options may be appopriate:
- Business rescue or restructuring – to stabilise cashflow and negotiate with creditors.
- Company Voluntary Arrangement (CVA) – to restructure company debts while continuing to trade.
- Company administration – to protect the business from creditor action while rescue or sale options are explored.
- Members’ Voluntary Liquidation (MVL) – for solvent companies looking to close tax-efficiently.
- Company strike off – for dormant companies with no outstanding debts.
After liquidation – What happens next?
- The company is dissolved and removed from the Companies House register.
- Directors are usually free to act as directors of other companies, unless disqualified (which is rare).
- Restrictions apply to using the same or similar trading names unless a formal statutory exemption applies.
- Directors’ personal credit is usually not impacted.
If you think your company may need a creditors’ voluntary liquidation, the earlier you take advice, the more options you’ll have.
How can we help - Book a free 1-2-1
If your company is struggling with unmanageable debts, decreased cashflow or concerns about about your company’s future, we can assess your situation and provide you with tailored solutions and options.
During your free initial advice meeting, we will discover a true picture of your company’s financial situation
and offer practical and expert guidance on your next steps.
Initial meetings can be held at our office or your premises and are completely confidential.
There is no charge for this meeting – charges only apply if and when terms of engagement have been agreed.
Frequently asked questions
What is the difference between CVL and compulsory liquidation?
A CVL is started voluntarily by the directors and shareholders of an insolvent company. Compulsory liquidation is usually forced by a creditor through the courts, often following a statutory demand and then a winding up petition. A CVL gives directors more control over timing and allows them to take advice before creditor action escalates.
How long does a CVL take?
There are several steps that need to be taken during any type of liquidation and it is important to consider that these steps take longer than you think.
- Appointing a liquidator may take around 2-4 weeks. However, liquidation cna sometimes begin in as little as a week should 90% of your shareholders agree.
- A straightforward liquidation can take six months from start to finish.
What happens to my personal guarantees?
Any debts with personal guarantees remain your responsibility after liquidation.
Can directors be disqualified?
Only if there is evidence of misconduct or failure to meet statutory duties. Most directors are not disqualified.
What does it cost?
The cost of a CVL depends on the site and complexity of the company. In most cases:
- Liquidator’s fees are covered from the sale of the company assets.
- If assets are limited, some insolvency firms ask directors to contribute to costs personally, but we never do.
- We provide clear, upfront advice on likely fees so there are no surprises.
Many directors understandably have concerns about insolvency costs and how fees are paid. In most cases insolvency practitioner fees are paid from company assets rather than by the director personally. Further details on how fees are calculated, approved and paid can be found in our guide to charge out rates and insolvency fees.
How do I shut down my business?
If you company is insolvent and cannot afford to repay its debts the correct course of action to achieve company closre is to opt for a formal insolvency process such as a creditors’ voluntary liquidation, this will enable you to effectively shut down an insolvent business. An insolvency practitioner will be appointed to liquidate the company and realise assets and use the proceeds of these sales to repay the company’s creditors.
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