Creditors’ Voluntary Liquidation (CVL) is a process initiated by the directors of a financially insolvent company that is unable to pay its debts. The purpose is to wind up the company’s affairs and distribute its assets fairly among creditors.

Companies typically opt for CVL when they conclude that their business is no longer viable or cannot feasibly return to profitability.

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Creditors Voluntary Liquidation

Arranging a Creditors’ Voluntary Liquidation

At Company Debt, we’re here to assist with Creditors’ Voluntary Liquidation (CVL), guiding you through the process of closing your company and settling debts. As your appointed liquidator, we manage the legalities and asset distribution, ensuring a fair resolution for all creditors.

When is the time to Choose Voluntary Liquidation?

Voluntary liquidation is the right choice under the following scenarios:

  1. If Your Business is Insolvent: This is when your company cannot pay its debts as they fall due, or its liabilities exceed its assets.
  2. If You Feel the Company Will Not Return to Profitability: Opt for liquidation if there’s no foreseeable path to turning the business around financially.
  3. If You’re Facing Personal Liability Risks: Consider this route to avoid personal liability for the company’s debts, particularly in situations of insolvent trading.
  4. If Creditors are Pressing for Payments: A CVL can offer a structured way to deal with creditor pressures, especially if they are threatening legal action.
  5. If You Wish to Protect Your Reputation: Voluntary liquidation can help manage a more controlled and respectful closure of the business.
  6. If You Wish to Avoid Compulsory Liquidation: Proactively choosing a CVL can prevent being forced into liquidation by creditors.

Getting Shareholders’ Agreement for Voluntary Liquidation

To initiate the CVL process, the company’s directors must follow a specific procedure to gain shareholder approval and appoint a liquidator to oversee the winding-up of the company.

(1) Directors’ Resolution

The directors must convene a meeting and pass a resolution expressing their intention to put the company into CVL. This resolution should outline the reasons for liquidation and the proposed method for winding up the company’s affairs.

(2) Shareholders’ Meeting and Resolution

The directors must then call a general meeting of shareholders to seek their approval for the proposed CVL. At the meeting, a resolution must be passed by a majority of shareholders (usually 75% by value) to authorize the commencement of CVL proceedings.

(3) Appointment of Liquidator

Once the shareholders’ approval is obtained, the directors must appoint an authorized insolvency practitioner as the liquidator. The liquidator’s role is to oversee the liquidation process, manage the company’s assets, and distribute the proceeds to creditors and shareholders according to the company’s legal obligations.

What is the Voluntary Liquidation Process?

The basic CVL process is as follows:

  1. Creditors’ Meeting Convened by the Liquidator: The liquidator will arrange a meeting with the creditors to inform them about the liquidation process and discuss their involvement.
  2. Liquidation of Company Assets: The liquidator oversees the sale of the company’s assets, aiming to maximize the returns for debt repayment.
  3. Distribution to Creditors: Proceeds from the asset sales are then distributed to creditors in the legally prescribed order.
  4. Finalisation and Dissolution of the Company: Once all the necessary steps are completed, the liquidator finalises the liquidation process, leading to the formal dissolution of the company.

What are the Advantages and Disadvantages of a CVL?


  • 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 cost of a CVL for a small company typically ranges from £4,000 to £6,000 plus VAT. This amount can vary depending on the complexity of the case.

It’s important to remember that any costs associated with CVL are usually paid out of the company’s assets. Only in rare cases where the company’s assets are insufficient to cover the cost of CVL would the directors have to pay out of their own pockets.

What is the Timeline of a Voluntary Liquidation?

On average, a voluntary liquidation takes about a year to complete. However, the exact timeline will vary depending on the complexity of the liquidation and other factors.

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What Happens to Outstanding Creditors in Liquidation?

When a company enters liquidation, the priority of who gets paid depends on the type of creditor they are. Secured creditors, who have a legal claim to specific assets of the company, are the first to be paid. Unsecured creditors, who do not have a legal claim to specific assets, are paid next, but they may not receive all of the money they are owed. Shareholders, the owners of the company, are the last to be paid, and they may not receive any money at all.

Order of Payment

  • Secured creditors: These creditors have a legal claim to specific assets of the company, such as property, plant, and equipment. They are paid first out of the proceeds from the sale of those assets.
  • Preferential creditors: These creditors are given priority over unsecured creditors due to the nature of their claims. They include employees for unpaid wages and salaries, the tax authorities for unpaid taxes, and the government for unpaid social security contributions.
  • Unsecured creditors: These creditors do not have a legal claim to specific assets of the company. They are paid out of any remaining assets after the secured and preferential creditors have been paid. However, they may not receive all of the money they are owed.
  • Shareholders: Shareholders, the owners of the company, are the last to be paid in a liquidation. They may not receive any money at all if there are not enough assets to pay all of the creditors.

Creditors Voluntary Liquidation FAQs

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.