Creditors Voluntary Liquidation

What Happens During A CVL?

  • All the affairs of the company are wound up
  • The company’s assets are realised to go towards the claims of creditors
  • Creditors are dealt with fairly
  • Relieves pressure on the directors

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Creditor’s Voluntary Liquidations – What are the steps?

  1. Realise that your company has a problem and contact Lines Henry for help and advice. We will make sure that CVL is the best solution for you and the company.
  2. The company will cease to trade. Employees have protected rights and the Government will pay them any money that they are owed for unpaid wages, holiday pay, pay in lieu of notice, and redundancy pay. The employees are told that they are going to lose their job and we explain their rights to them and tell them how  they can claim what is owed to them.
  3. We gather as much information about the financial affairs of the company as we can. This includes details of assets, debtors, assets on finance, and secured and unsecured creditors.
  4. The directors formally instruct Lines Henry to help put the company into liquidation and a date for this is set.
  5. Notices to shareholders are signed informing them of a meeting to pass a resolution to wind up the company.
  6. Notices to creditors are signed to inform them of the liquidation and what their rights are.
  7. Creditors are given a statement of affairs of the company which gives details of how much its assets are worth and how much money is owed. To ensure that this is accurate, the assets may be professionally valued.
  8. Creditors are also given information about the reasons why the company has had to go into liquidation.
  9. On the day set for the liquidation, the shareholders pass the resolution to wind up the company, and the creditors approve the appointment of a liquidator.

 

CVL’s & Contractor Companies

Over the last few years we have dealt with numerous Contractor Companies where, for various reasons, the Company has got into difficulties. The usual reasons are ill health, or failing to find a new contract. In all cases the result has been the same. The director has continued to withdraw the funds in the Company’s bank account that were set aside to pay Corporation tax and VAT.

Eventually HMRC will demand payment of sums due to them. Where possible we advise the director to try and negotiate a Time to Pay agreement with HMRC. They expect payment of all arrears within 12 months and all future tax to be paid on time. If the director does nothing the ultimate sanction of HMRC is to issue a Winding Up Petition to have the Company wound up by the Court. Where this occurs the director will invariably become liable to repay some or all of the money that they have taken as either an Overdrawn Loan Account or Unlawful Dividends.

Alternatively the director can put the Company into creditors voluntary liquidation (CVL). Any sums that the director owes the Company are still repayable, however we will be discussing with the director how they intend to repay these sums from before we are appointed. We have directors on what effectively amount to Payment Plans ranging from 12 to 60 payments. We have been working in this sector long enough to recognise that it is unrealistic to insist on predetermined repayment periods as Contractors income can be unreliable. One of the main reasons Contractors fail to keep to Time to Pay agreements with HMRC is the irregular nature of their income.

We have periodically come across examples where directors have asked us about CVL, been advised that they will have to repay monies and have the sought alternative advice. We have then been told that they have been advised, (rarely from a Licensed Insolvency Practitioner) that they won’t have to repay Overdrawn Loan Accounts/Unlawful Dividends. Our standard advice when this occurs is for them to ask for confirmation of this in writing. Ultimately most directors realise that if they have taken out too much money it will have to be repaid.

Please call Lines Henry on free phone 0800 012 6649 to find out how we can help 

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