Creditors’ voluntary liquidation
If your company is struggling with debts it cannot repay, a creditors’ voluntary liquidation (CVL) may be the most effective way to close the business in an orderly manner, deal with creditors fairly, and draw a line under company liabilities.
Last Updated: 24/03/2026
Are you looking to liquidate your company?
At McTear Williams & Wood, our licensed insolvency practitioners guide directors through every step of the CVL process, from the first signs of distress to the final closure of the business. We’ll also explore and exhaust whether recovery or rescue options are available first, so you can make the best decision for your situation.
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 and reducing stress.
Key points:
- Directors and shareholders pass a winding-up resolution to begin the process.
- A licensed insolvency practitioner is appointed to act as liquidator, and the directors are relieved of ongoing responsibilities.
- Company assets are sold (asset realisation) and funds are distributed to creditors according to legal priority.
- Remaining unsecured debts are written off when the company is dissolved at Companies House.
- Directors may be able to buy back assets through a “phoenix company” structure, subject to compliance with insolvency law.
Director
Understand your financial options
Check the health of your business with our free business health check tool.
Get an indication as to whether your company has what it needs to survive.
Includes:
-Company health assessment
-Types of liquidation available
-Options & next steps
*All information provided is completely confidential and will not be shared with a third party
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 the options to recover 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 you should seek advice immediately. Continuing to trade when insolvent risks accusations of wrongful trading, 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 >
BUSINESS RESCUE & INSOLVENCY SPECIALISTS
Download your free Directors' guide
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 or a winding-up petition.
- The company has lost key contracts or funding and cannot recover.
- You want to avoid the risk of personal liability by trading while insolvent.
Benefits of a CVL
- Controlled process – directors choose timing rather than being forced into court liquidation.
- Fair to creditors – assets are sold and distributed according to insolvency law.
- Legal protection – directors reduce the risk of wrongful trading claims if they act responsibly.
- Fresh start – potential to buy back company assets and continue under a new business.
Free advice line for distressed company directors > 08003317417
What happens to employees?
In a CVL, employees are made redundant. They may be entitled to claim 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 have a dedicated team who work with employees to ensure this happens.
What happens to creditors?
Company debts are settled in a strict order of priority:
- 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 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’ meeting – Creditors vote to confirm the appointment of a 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.
Costs of a CVL
The cost of a CVL depends on the size 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.
Alternatives to liquidation
Liquidation may not always be the only option. At McTear Williams & Wood, we always look for rescue-first solutions before recommending CVL. Alternatives include:
- Company Voluntary Arrangement (CVA) – restructure debts with creditor approval.
- Company administration – protect the company from creditors while a rescue plan is developed.
- Members’ Voluntary Liquidation (MVL) – if the company is solvent but you want to close it tax-efficiently.
- Strike off – for dormant or very small companies with no 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 formal notice is given.
- Credit ratings of the business are affected, but directors’ personal credit is usually not impacted (unless personal guarantees are in place).
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
How long does a CVL take?
Typically 2–3 weeks from first meeting to get into liquidation, though complex cases can take longer. Then six to twelve months post appointment.
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?
Fees vary, but we are transparent. Where possible, costs are met from company assets.
Can I start a new business afterwards?
Yes, directors can usually start trading again. You may even be able to buy back assets, but restrictions apply to re-using the same company name.
Related services
