What is a Creditors’ Voluntary Liquidation (CVL)?

A Creditors’ Voluntary Liquidation (CVL) is a closure process initiated by the directors (or shareholders) of a company that can no longer pay its debts[1]Trusted Source – GOV.UK – Directors’ Responsibilities in Liquidation.

It’s a voluntary decision to liquidate the company’s assets under the guidance of an appointed insolvency practitioner.

Often chosen to prevent compulsory liquidation via a winding up petition, the CVL process is designed to ensure creditors receive the best possible return.

It also offers directors a way to close the business responsibly, minimising potential legal repercussions.

>>Read our full article on the Advantages and Disadvantages of a Creditors’ Voluntary Liquidation

Creditors Voluntary Liquidation (CVL)
Quick Quote for Closing a Company

Why Would You Voluntarily Choose a CVL?

Here’s when a CVL might offer the best way forward:

  • You’re Having Serious Cash Flow Problems – If you’re unable to pay suppliers, creditors and employees, a CVL provides a legal process for you to close down in an orderly manner[2]Trusted Source – GOV.UK – Find an insolvency practitioner.
  • Your Company Is Balance Sheet Insolvent – Even if cash flow is manageable day-to-day, a CVL may be the prudent choice if your company’s total liabilities far exceed its assets, leaving it balance sheet insolvent with no equity cushion.
  • There’s No Viable Path Forward – A CVL allows you to properly wind down the company when there is no realistic way for the business to return to sustainable profitability.
  • You Need to Protect Yourself from Liability – Entering a CVL instead of continuing to trade while insolvent can help protect you as a director from potential personal liability for wrongful trading claims.
  • You are Facing Creditor Pressure – If you’re facing pressure such as a CCJ or a Winding up Petition, you may be forced into compulsory liquidation[3]Trusted Source – GOV.UK – Apply for Compulsory Liquidation if you don’t consider a CVL.

If you’re unsure of your insolvency status, click here to use our insolvency test.

How Does a CVL Work?

If you’re considering CVL, here’s the process broken down into simple steps.

The first step involves you, the director, acknowledging that the company cannot continue due to its debts.

As a director, you have a duty to act in the best interests of your creditors when your company becomes insolvent. Choosing a CVL demonstrates responsible leadership when there’s no viable path to recovery.

Once the decision is made, you will need to appoint a licensed insolvency practitioner (IP). The IP acts as the liquidator, taking charge of the liquidation process.

Their role is a legal requirement, ensuring that assets are fairly valued and that creditors are paid fairly.

You must hold a board meeting to agree on the liquidation, and this decision should be documented in the company’s minutes.

Following the board’s decision, shareholders must formally agree to the liquidation.

This is typically done through a General Meeting, where at least 75% of votes (by share value) must be in favour of the CVL.

The IP will send a report detailing the company’s assets and liabilities to all known creditors. This report invites creditors to a meeting, either physically or virtually, where they can vote on the liquidation process.

The IP takes control of the company, selling off assets to repay creditors in order of priority. This includes dealing with outstanding contracts, employee claims, and any legal disputes.

After assets are liquidated, funds are distributed to creditors. This is done in a strict legal order, starting with secured creditors, followed by preferential creditors (like employees), and then unsecured creditors.

Once the process is complete and funds distributed, the company is formally dissolved. This means it ceases to exist, and you are no longer a director.

What are the Immediate Consequences of Entering into a CVL?

Entering a Creditors’ Voluntary Liquidation (CVL) has immediate and far-reaching consequences for your company. Here’s a summary of the key impacts:

  • Directors lose control of the company: You hand over control to an appointed liquidator.
  • Employees face redundancy: Most staff face immediate redundancy. Some may be retained briefly if needed for winding down.
  • Directors face scrutiny: Your conduct leading up to liquidation will be examined. You may face scrutiny for potential wrongful or fraudulent trading.
  • Company assets are sold: Company assets are sold to repay creditors. The liquidator manages this process.
  • Trading ceases: Your company stops operating immediately in most cases. Ongoing contracts are typically terminated.

Remember, while a CVL can be a challenging process, it’s often the most responsible choice for insolvent companies. If you’re considering this option, seek professional advice to understand the full implications for your specific situation.

What are the Costs Associated with a CVL?

The costs associated with initiating and carrying out a Creditors’ Voluntary Liquidation (CVL) primarily include the liquidator’s charges, legal fees, and administrative expenses.

The liquidator’s fees, which can vary significantly based on the complexity of the liquidation, are usually the largest expense and are typically £5-7k for a small company.

>>Read my full article on the costs of liquidation

How Long Will the CVL Process Take?

The duration of a Creditors’ Voluntary Liquidation (CVL) can vary, but it typically takes 6 to 12 months to complete.

How Can Company Debt Help with Voluntary Liquidation

Company Debt offers comprehensive support and guidance to help you close your company voluntarily.

We provide a free initial consultation to understand your specific situation and tailor our advice accordingly. Our licensed insolvency practitioners (IPs) will assess your company’s financial position and recommend the best course of action.

Reach out to us via live chat, email us at info@companydebt.com, or give us a call at 0800 074 6757. We’ve helped thousands of directors navigate difficult financial circumstances. Let us help you find the best path forward for your company’s financial future.

Creditors’ Voluntary Liquidation FAQs

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.UK – Directors’ Responsibilities in Liquidation
  2. Trusted Source – GOV.UK – Find an insolvency practitioner
  3. Trusted Source – GOV.UK – Apply for Compulsory Liquidation