What is Creditors’ Voluntary
A CVL is poles apart from a Compulsory Liquidation, where a company is forced to liquidate by a court.
Directors of an insolvent company may choose to pursue a CVL if the company’s shareholders agree it’s the right decision.
When cash flow is poor and creditors are owed unpayable debts, a CVL might be the best choice.
It is a director-led process where a moratorium – a period halting legal obligations – is put in place to stop creditors from approaching the company with debt claims.
Shareholders must vote to approve the process. Following this, the firm will cease trading and sell off its assets.
A CVL is an option for companies that are struggling to cope with the stress and pressure of creditors who need to be repaid.
It is both professional and voluntary, providing the company directors with a greater variety of options than if they were entering compulsory liquidation.
With a CVL, creditors can submit their claims in an orderly way and the process becomes controlled and manageable.