How To Place A Limited Company Into Creditors Voluntary Liquidation (CVL)
Procedure to place a Company into CVL
The first step to placing a Company into Creditors Voluntary Liquidation (CVL) is to hold a meeting of directors to agree to call a meeting of shareholders and a decision procedure for the creditors. At that meeting the Chairman must sign the necessary Notices to call those meetings. If you instruct Purnells to assist you to liquidate your company we will call the necessary directors meeting for you and prepare the necessary Notices which would also include letters to the Company's Bankers, employees and creditors to ensure that all relevant parties are notified of the meeting.
It used to be the case that Notice of the meeting had to be advertised in two local newspapers, which is no longer the case, unless the nominated Liquidator feels that it is required due to the specific circumstances of the case.
The minimum period between signing the Notices and holding the meetings of shareholders and creditors decision procedure is three business days, subject to bank holidays. It is considered best practice to provide two clear days for posting either way and the meetings are usually held circa 16 days after the date Notices are signed. This means that within 16 days of signing the necessary forms your Company's problems would no longer have to be dealt with by you.
There are several decision procedures that can be used for the creditors. Usually this is either done by way of a virtual meeting, which is essentially just a conference call, or by Deemed Consent.
Deemed Consent can best be illustrated with an example. Let us assume that the Shareholders meeting is on the 10 January. Provided there no objections are received by 11:59 pm on the 10 January, then the Liquidator’s appointment is ratified by the creditors.
In order to object either 10 creditors, or 10% in number or value, would need to object to stop the Deemed Consent procedure continuing and requisition a physical meeting. Accordingly it is now rare for there to be a physical meeting of creditors in a Creditors Voluntary Liquidation.
Ahead of the day of Liquidation Purnells would prepare all of the necessary forms, agenda, Statutory Statement of Affairs and a "Pack" of documents to be presented to the creditors via an online portal. We will carefully explain the procedure so that you are fully aware of the order of events for the day. One of the directors must be the Chairman of the meeting, if there was a virtual or physical meeting, but Purnells would do most of the talking by running through the agenda and providing an update on the insolvency of the Company.
At the meeting of shareholders the shareholders will nominate a liquidator of their choice. This liquidator must be ratified by the creditors, or they can appoint a different person/people instead.
So What Happens Next?
Following the meeting of shareholders the Company is in liquidation and all its affairs will be dealt with by the liquidators thus relieving the directors of their day to day responsibility in respect of the Company. Any correspondence or calls from creditors can then be referred to the Liquidator.
Before deciding to place your company into Creditors Voluntary Liquidation, or CVL, it is best to have a meeting with a qualified and licensed insolvency practitioner. If you would like a free telephone meeting with a qualified and licensed insolvency practitioner please telephone 01326 340 579 and speak to Chris Parkman or email him at firstname.lastname@example.org.
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