Guide for Creditors Voluntary Liquidation in The UK

The term creditors voluntary liquidation or CRV refers to the situation when the shareholders or director of the company goes for voluntary liquidation to pay off the debts of their creditors. When a company is unable to pay its debts the creditors to that company can present a winding-up petition to liquidate the company. In such circumstances, the shareholders and directors of such companies do not have any direct control over the process. This kind of liquidation is called compulsory liquidation and proceedings will be governed by the court.


Under the Creditor, Voluntary Liquidation shareholders and directors have the option to control the appointment of a liquidator. There is a process to start and complete the Creditors Voluntary Liquidation and the steps for it are mentioned below:-

Notification to shareholders - The first step to start CVL is to circulate the notification for it among the shareholders of the company. This notification can be served in the scenario where the company is unable to pay its debts or the majority of shareholders give their consent. The company can request shareholders to stop their further investments in the company. There are more scenarios where directors of the company can give a thought to Creditors Voluntary Liquidation some of these are:- Directors of the company think that business is not viable. There is the fear of wrongful trading in the minds of directors. The company is not competent enough to pay its debts. Shareholders start threatening the company to enter into compulsory liquidation.

Calling the Shareholder’s Meeting 

Once the notification for the Creditors Voluntary Liquidation is served to the shareholders they can appoint a Liquidator and call for a meeting. The appointment of the Liquidator is necessary to carry out the CVL Process. Once the shareholder’s meeting is called they can elect the Liquidator. 

Appointment of Liquidators for Creditors Voluntary Liquidation

Once the majority of shareholders agree to the Liquidation then the director can proceed to appoint an insolvency practitioner who will act as a Liquidator for the company. Under every circumstance, the director of the company has to act for the good interest of the company so appointing a right insolvency practitioner. The Liquidator may be proposed by the directors or shareholders but it is very important to get the approval of Creditors for his appointment. If you are also looking for professional Insolvency Practitioners then you can take the help of Simple Liquidation as they have highly qualified and approved insolvency practitioners approved by the Insolvency Practitioners Association and the Institute of Chartered Accountants in England and Wales.

What are the roles played by the Liquidator in CVL? 

Once the process of liquidation is initiated by the Liquidator he will arrange the meetings of the creditors as and when required. He will be looking after all the paperwork related to this process and will sell the assets of the company to ensure that payments are made to the creditors. The Liquidator will charge his fee or other costs related to the whole process out of this money if not agreed otherwise. He is also responsible to check the past conduct of the company’s directors to ensure that no fraudulent activity has been made in the past and if he finds any such activity it will be his responsibility to report the same to the relevant authorities.

Listing the company for CVL

To put the company into voluntary liquidation is quite easy and this whole process happens under the guidance of the insolvency practitioner. The process of Creditors Voluntary Liquidation generally follows the below steps:- 

  1. The directors of the company can arrange for the general meeting which is usually extraordinary. The notice which needs to be circulated to call this meeting is usually 14 days. IN this meeting a resolution is passed to wind-up the company and for passing this resolution at least 75% of the shareholders should vote in the favour of this resolution. Once the resolution is passed a liquidator is appointed to carry on the proceedings.

  2. Meanwhile, the proposed liquidator has to notify the creditors of the company about the intention of directors and shareholders to go into voluntary liquidation. Only three days' notice is served to the creditors stating this intention and the liquidator can provide the financial position of the company to the creditors resulting in this liquidation. It may be possible that creditors have some questions related to the appointment of the LIquidator, in such cases, virtual meetings can be held to sort out any such questions or concerns.

  3. After passing the resolution to wind up the affairs of the company it is the responsibility of the liquidator to advertise this in the Gazette and file a copy of the same at Companies House. He is also responsible to investigate the financial transaction that happened in the past to provide the best results to the Creditors. A report for the Directors conduct to insolvency is also prepared so that the disqualification can take place. 

  4. The process of realization of assets and distribution to the creditor is governed by the Insolvency act 1986. All distributions to the creditors of the company going into Creditors Voluntary Liquidation must adhere to the conditions and guidelines mentioned in this Act. It is the responsibility of the LIquidator to take the formal steps to complete the receipts and payments after the realization of the actual assets of the company. 

Advantages and Disadvantages of Creditors Voluntary Liquidation 

Now after discussing the processes and steps involved in the process of CVL it is important to throw light on the advantages and disadvantages of this type of liquidation. Below are some of the major advantages as well as disadvantages which are associated with this process:- 

Advantages of CVL

Control - 

One of the major advantages which are associated with this type of Liquidation is that directors have more control over the process. It also helps to stop any legal action against the directors unless they have given personal guarantees for the debt of the company. 

Low Cost - 

This kind of Liquidation involves low costs in comparison to other forms of company liquidation. The primary costs which are involved in the process are just arranging the statements of the company and arrangement of the meetings of creditors. Apart from it, there are any other costs involved in the process. Even the professional fee of the liquidator is to be paid out of the money realized after the sale of the assets of the company. 

Avoid court processes -

Being petitioned by court time and again can be a very embarrassing situation. As we know that processes of courts take a long time and it will be wise to wind up as quickly as possible using CVL to avoid continuous chasing from courts as well as creditors. 

Disadvantages of CVL 

Investigation of Director’s conduct - One of the major disadvantages of the CVL is it requires an investigation into the conduct of directors over past years. Any wrongful conduct will be reported to BIS and can invite serious legal action such as prohibition to become director of any company for at least 15 years.

Public Process - Yes, this is a public process and the notification for the winding up to the company is required to be advertised in the Gazette and there is no way to avoid it as it is mandatory for the company going into CVL. 


Location: London, UK

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