FAQs for directors: Creditors' voluntary liquidation (CVL)
FAQs for directors
Creditors' Voluntary Liquidation ("CVL")
When should I put my company into creditors' voluntary liquidation? When it is insolvent and reached the end of the road but always take advice from a licensed insolvency practitioner first as another insolvency process might be more appropriate.
How quickly can I liquidate my company? You can put your company into liquidation within seven days by giving written notice to all known creditors. We would normally do this for you. Shareholders are entitled to a longer period of 14 days unless they consent to short notice. Read more
As a director am I personally liable for the company's debts? Normally no. That is unless you have given a creditor a personal guarantee, trade wrongfully or act in breach of your duties as a director. Taking and acting on early professional advice should limit the risk.
Can I become a director of another company if my company is liquidated? Yes. The main grounds that stop people acting as directors is if they are personally bankrupt or disqualified by the Insolvency Service for serious misconduct.
What happens if I cannot afford to liquidate my company? Usually a creditor like HM Revenue & Customs will petition to wind the company up and it will then be put into liquidation. The are still alternatives though so please get in touch with one of our experts on 0800 331 7417. Read more
What is a phoenix company? A phoenix company describes a new company that has risen again from a previously failed company. Quite often the old company will have gone into liquidation and the directors will buy back the assets and start trading again in the same business. It may upset creditors of the old business but it is legal if done properly. It is an effective tool to help a company that perhaps had a one off hit and needs to start again. Read more
Can I start another company with a similar name? Yes but be very careful. Section 216 of the Insolvency Act 1986 sets out the law on this and you have to fit within one of the three exceptions. Be warned those exceptions are not as simple as they look so always take advice first.
Can I buy my company's business and assets from a liquidator? Yes as long as your offer is the best received by the liquidator. Usually the liquidator will want to openly market the business and assets first but sometimes that can be avoided and a professional valuation relied on instead.
If I buy back my company's business and assets will employee liabilities transfer to the new company? No, unless you specifically agree otherwise with the liquidator. In contrast to the automatic transfer of liabilities in an administration.
How can I look after my employees? Employee claims are paid from the Redundancy Fund operated by the Government up to a statutory cap (currently £489) per week (2017). An employee paid more than the statutory cap with 10 years service is likely to get over £10,000.
Can I pay off my local suppliers before my company is liquidated? No. All creditors have to be treated equally.
What is wrongful trading? Wrongful trading is continuing to trade after the point where the Board should have realised the company could not avoid insolvent liquidation. From that point the directors can be made personally liable for any increase in creditors. If you take and follow professional advice this should not arise.
Can I be disqualified from acting as a director? Only if you have not acted properly. Acting on professional advice is usually a complete 'get out of jail card'. The most common grounds on which directors are disqualified:
- Trading to the detriment of HMRC
- Not treating creditors equally
- Recklessly incurring credit
Get in touch with our expert team of business rescue specialists for more information on 0800 331 7417