A Creditors Voluntary Liquidation (CVL)[1]Trusted Source – .GOV- Arrange liquidation with your creditors is a process allowing the directors of a limited company to voluntarily close an insolvent company.

Directors or shareholders initiate it as a preferable alternative to being forced into a compulsory liquidation via a winding-up petition.

The Creditors’ Voluntary Liquidation process must be carried out by a licensed insolvency practitioner and agreed upon via a shareholder’s vote.

Once the insolvent company has been liquidated, the debts are wiped out along with the limited company itself.

Creditors Voluntary Liquidation

What is a Creditors Voluntary Liquidation?

Creditors’ voluntary liquidation means that a company’s own shareholders vote to wind it up. Once directors have concluded that the logical decision is to close down the company, a 75% majority of shareholders is required to initiate the process.

With almost all CVL situations, the company has reached the point where it is either about to be forced into compulsory liquidation by creditors or the directors recognise the company is insolvent and has no future.

Once appointed, the insolvency practitioner (IP) will close down the company and sell any assets to seek the best return for company creditors, in order of priority.

» MORE Read our full article on Who Gets Paid First in Liquidation

Once the Insolvency Practitioner (IP) has taken over, your role as director will cease, though you will be requested to provide certain pieces of information to the IP as the process unfolds.

When is Creditors Voluntary Liquidation Used?

Creditors’ Voluntary Liquidation (CVL) is employed in the United Kingdom when a company is insolvent and unable to meet its financial obligations. This process is undertaken voluntarily by the directors of the company when they acknowledge that continuing to trade is not in the best interests of the creditors.

The purpose of a CVL is to provide an orderly winding down of the company’s affairs. It allows the assets of the company to be fairly distributed among its creditors, and in some cases, shareholders. A Licensed Insolvency Practitioner (IP) is appointed to oversee the process and to ensure compliance with the relevant legal requirements.

The key triggers for a CVL include consistent trading losses, unpaid creditor bills, and mounting debts that exceed the value of the company’s assets. It may also be initiated if the directors identify that the company has no reasonable prospect of recovery and wish to cease operations responsibly.

The CVL process begins with a board resolution by the company’s directors, followed by meetings with both the shareholders and creditors to gain approval for the liquidation. The IP then takes control of the company’s assets, selling them to pay off as much of the company’s debt as possible.

Why Put a Company into Voluntary Liquidation?

Choosing liquidation means you’re taking steps to close the company correctly, you’re bringing in professional help, and you’re going to get creditor pressure off your back.

Typical reasons for putting a company into CVL include:

  • to prevent imminent compulsory liquidation by creditors
  • the business fails the insolvency test, and the directors wish to avoid the risks of wrongful trading that continuing would mean
  • the company can’t pay major suppliers, or other priority bills when they fall due
  • the limited company has defaulted an existing time to pay agreement with HMRC
  • when a shift in your industry means that your key product or service is suddenly no longer viable, and unlikely to make a profit in the future

Creditors Voluntary Liquidation (CVL) Requirements and Eligibility

In order to qualify for a CVL, the company must meet the following requirements:

  • The company must be insolvent and unable to pay its debts. This means that the company’s liabilities exceed its assets.
  • The company must be a registered company under the Companies Act 2006. This excludes certain entities, such as banks and insurance companies.
  • There must be existing creditors owed at least £750 to the company. This is the minimum amount of debt that a creditor must be owed in order to be able to vote at the creditors’ meeting.
  • The directors of the company must hold a meeting and pass the required resolutions to place the company into liquidation. These resolutions must be passed by a majority of the directors present at the meeting.
  • The shareholders of the company must be notified of the proposal to liquidate within 5 business days.
  • An insolvency practitioner must consent to act as the nominated liquidator. The liquidator is the person who will be responsible for winding up the company’s affairs.
  • Creditors must approve the nominated liquidator at a creditors’ meeting. Secured creditors’ approval is not required. Secured creditors are creditors who have a security interest in some of the company’s assets.
  • The company must stop all business activities and cease trading once liquidation starts, except as required to benefit the liquidation. This means that the company can no longer carry on its normal business activities.
  • The directors of the company must cooperate fully with the liquidator during the process. This includes providing the liquidator with all necessary information and documentation.

If a company does not meet all of these requirements, it may not be eligible for a CVL. In this case, the directors should seek professional advice on the appropriate insolvency procedure.

What is the Process for Creditors’ Voluntary Liquidation?

The process for conducting a Creditors’ Voluntary Liquidation is as follows:

(1) Appointing an Insolvency Practitioner (Liquidator)

Once you have discussed the possible liquidation with an insolvency expert to make sure it is the right decision for you, the next step is to appoint a liquidator. In a Creditors’ Voluntary Liquidation, the shareholders will appoint and pay for an authorised insolvency practitioner to act as the liquidator.

The liquidators appointment will then need to approved by the creditors at the creditors’ meeting.

This usually takes place three weeks after the initial engagement.

(2) The Meeting of Directors

The directors must hold a meeting to confirm that the company is insolvent and that steps are being taken to place the company into a CVL.

A meeting of the company directors can be called straight away. This process can take place particularly quickly if it’s a small company with only a handful of directors.

(3) Consent to Short Notice

If 90 percent of the company’s shareholders sign a ‘Consent to Short Notice”, the shareholders’ meeting can be called and held immediately.

If the shareholders do not agree, a notice period of 14 days will need to be given before the shareholders’ meeting can be held.

(4) The Shareholders’ Meeting

The shareholders’ meeting will generally occur immediately before the creditors’ meeting. If the shareholders agree to the liquidation, they can then confirm the directors’ choice of liquidator.

(5) The Creditors’ Meeting

After the shareholders’ meeting, there must be a creditors’ meeting, which is often held on the same day, usually remotely, unless requested otherwise.

Creditors must receive a statutory minimum of 7 days notice of the meeting, although within 14 days is considered to be better practice. Often creditors will receive 3-4 weeks’ notice.

(6) Liquidation of the Company

At this point, the liquidation of the company can go ahead. From start to finish the time it takes to complete the CV sale of assets can vary dramatically depending on the complexity of the case.

However, in the vast majority of cases (around 80 percent), we would expect the process to take between 2-3 months. In more complex cases it can take as long as 12-24 months.

What are the Advantages and Disadvantages of Creditors Voluntary Liquidation?


  • Directors benefit from more control than a compulsory process
  • Less risk of wrongful trading
  • Creditor pressure is instantly removed
  • Directors have the possibility to buy back assets
  • Directors can claim redundancy


  • The company will be permanently closed
  • All staff must be made redundant
  • Personal guarantees will be called in
  • Voluntary Liquidation is a public process that is advertised in the Gazette, a journal of public record

How Much Does a CVL Cost?

The CVL of a small company costs between £4000-6000 + VAT. This will vary depending on the complexity of the case.

Some company directors, aware of the business situation, delay putting their company into creditors’ voluntary liquidation for fear of being unable to pay for it. The critical point to remember is that assuming there are some company assets, any costs are taken from the liquidation itself.

The only time directors would have to pay for the liquidation out of their own pockets is where  the company assets fall below the basic cost of the liquidation.

What is the Timeline of a Creditor’s Voluntary Liquidation (CVL)?

On average a CVL process will take a year to complete, from start to finish.

The basic timeline is as follows:

(1) The first step is to call a shareholders’ meeting. Shareholders must be given 14 days’ notice of the meeting. However, the meeting can be held at shorter notice if 95% of shareholders are in agreement.

(2) From the day after the shareholders’ meeting (where the company is wound up and a liquidator is nominated), the company directors have seven days to deliver a notice to creditors, requesting their vote on the resolutions passed.

(3) The decision date or meeting on these resolutions should be no earlier than three days after the notice is delivered and no later than 14 days after the shareholders’ meeting.

(4) Once the formal process begins, the time to liquidate will vary depending on the complexity and other factors. In a straightforward situation, it might take 3 months, but 12 months would be a more typical timeframe.

What are Creditors’ Rights in a Voluntary Liquidation?

The creditors are entitled to see a list of all creditors of the company and to view a summary of the Statement of Affairs at the Meeting of Creditors. They are asked to vote to approve the Liquidator and can even create a committee to control liquidation costs

Creditors are paid by order of priority from the sale of the company assets.

Registered creditors will be invited to a Meeting of Creditors and notified at least seven days before the meeting. The meeting will be online unless specific circumstances require a physical meeting.

At the Meeting of Creditors they can:

  • Vote on the appointment of the liquidator
  • Ask questions of the liquidating company director/s
  • View a sworn Statement of Affairs [A list of the company assets and liabilities]
  • View a history of the liquidating company up to its liquidation
  • View a summary of all claims of all creditors

Creditors who do not want to attend can vote by Proxy on the liquidators’ appointment. A report of what happened at the Meeting of Creditors will be sent within 28 days of the meeting taking place

The Role of Directors and Shareholders in Creditors Voluntary Liquidation


  • Must make a declaration of solvency and convene a board meeting to approve the liquidation.
  • Are required to obtain and consider a licensed insolvency practitioner’s opinion on insolvency.
  • Must notify shareholders of the proposal to liquidate within 5 business days.
  • Are responsible for ceasing company operations, collecting assets, and cooperating with the liquidator.
  • Must provide company books and records and a statement of affairs to the liquidator.
  • Retain their statutory duties and can be held liable for fraudulent or wrongful trading.


  • Have the right to appoint a liquidation committee and appoint up to 5 members.
  • Can vote to appoint a different liquidator at the initial creditors meeting.
  • May question the liquidator’s actions and help safeguard their interests.
  • Have no role in the liquidation process once it commences. They will not receive any dividends.
  • Can appeal to court if they believe the liquidation is unnecessary or the company is solvent.

What Happens to Directors in a Creditors’ Voluntary Liquidation?

After a liquidator has been appointed, the director’s conduct in the period leading up to the insolvency will be under scrutiny.

If the director did not act in the best interests of creditors or behaved in a manner not strictly legal, he may face accusations of wrongful trading[2]Trusted Source – Legislation- Insolvency Act 1986, Wrongful Trading, and there is the potential to be held personally liable for part or all of the company debts.

If you’re a company director, we can also advise you on where liquidation would bring with it director’s redundancy payment.

» MORE Read our full article on Directors Redundancy Payments in Insolvency

Key Differences Between Creditors Voluntary Liquidation and Other Types of Liquidation

Creditors voluntary liquidation differs from other forms of liquidation in some important ways:

  • It is initiated voluntarily by the directors, rather than forced by a court order like compulsory liquidation.
  • It requires the directors to declare insolvency and inability to pay debts as they become due. Other voluntary procedures like members’ voluntary liquidation do not require insolvency.
  • The liquidator is chosen by creditors rather than members/shareholders. In a members’ voluntary liquidation, members select the liquidator.
  • There is no solvency declaration or members’ approval required like in members’ voluntary liquidation.
  • Asset distribution follows the legal order of priority, paying secured and preferential creditors first. Members voluntary liquidation allows distributions to members after paying creditors.
  • The process is supervised by creditors rather than members. Creditors have more control over the liquidator’s actions.
  • It avoids the publicity and reputational damage of compulsory liquidation, administration or receivership.
  • Directors’ conduct is not investigated like in compulsory liquidation or administration.
  • It allows directors a degree of control over the process compared to other external administrations.

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Creditors Voluntary Liquidation FAQs

What is a CVL?

A CVL is a process where a company that is unable to pay its debts is voluntarily liquidated (i.e., its assets are sold) with the proceeds distributed to its creditors. This process is usually initiated by the company’s directors, who will appoint a liquidator to manage the process.

A CVL can be initiated by the company’s directors, or by a majority of the company’s creditors.

The steps involved in a CVL include the appointment of a liquidator, the investigation of the company’s affairs by the liquidator, the sale of the company’s assets, and the distribution of the proceeds to the company’s creditors.

During a CVL, the company’s employees will typically be made redundant, and will be entitled to claim any unpaid wages or redundancy pay from the government’s Redundancy Payments Office.

During a CVL, the company’s directors may be held liable for any wrongful trading or other misconduct contributing to the company’s financial difficulties. They may also be required to provide information and assistance to the liquidator in investigating the company’s affairs.

During a CVL, the company’s creditors will be ranked in priority order, and will be paid from the proceeds of the sale of the company’s assets in accordance with that ranking. The company’s secured creditors, such as banks, will typically be paid first, followed by unsecured creditors such as suppliers and employees.

During a CVL, the company’s shareholders will typically receive nothing, as the proceeds of the sale of the company’s assets are used to pay the company’s creditors.


The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.

You can learn more about our standards for producing accurate, unbiased content in our editorial policy here.

  1. Trusted Source – .GOV- Arrange liquidation with your creditors
  2. Trusted Source – Legislation- Insolvency Act 1986, Wrongful Trading