As we wrote when the Insolvency Service released their latest set of corporate monthly insolvency statistics last week, the number of business insolvencies is heading for a 14-year-high. 

There will be more businesses closing their doors this year than there have been since the depths of the great recession in 2009 with creditors voluntary liquidations (CVLs) making up the vast majority of cases with 18,848 out of 23,153 (81%) cases up to the end of November. 

So what are CVLs and why are so many businesses using them to shut down? 

Next steps

Once the directors of an insolvent company decide that they want to go down the CVL road, they will convene a shareholders meeting. 

During this meeting they will acknowledge the company’s inability to meet its financial obligations and advise the shareholders that the company should wind up the business affairs voluntarily. 

Shareholders will then vote to pass a resolution to cease trading and make it formal. It requires 75% of the shareholders attending to vote in favour of the resolution.

Once the decision has been made the members will then be able to appoint a licensed insolvency practitioner (known as the liquidator in his scenario) to oversee all aspects of the process including the orderly distribution of the company’s assets among its creditors. 

The first task the liquidator will perform is beginning a quick investigation into the company’s statement of affairs which is based on the information provided by the director/s before notifying the creditors of the company of its intention to enter voluntary liquidation. 

The liquidator will provide them with information about the company’s financial position ahead of the creditors meeting where they can scrutinise the company’s financial affairs and contribute their claims if necessary.  

Once this is completed they will then file a copy of the documents at Companies House and it will be advertised in The Gazette

The liquidator will then carry out a more thorough and detailed report on the company’s financial affairs once they have full access to the companies books and records, which will ultimately allow them to achieve the best result for creditors. They also have a formal duty to create a report on the directors’ conduct for the Insolvency Service if they identify any wrongdoing.

Once all assets have been realised and distributions have been made to creditors, the liquidator will take the formal steps to agree the final receipts and payments.

With 2024 just around the corner, if your business has no real viable way forward then this is the best time to join thousands of other business owners and directors by considering a creditors voluntary liquidation.

If everything is straightforward then you could be ready to move onto your next professional venture early in the new year with all the loose ends from your previous company tied up.

All you have to do is get in touch today.  

We offer a free initial consultation with one of our team of expert advisors. They will help you gain a better understanding of your financial position as well as the options you have available and you may find you have more than you initially thought. 

All you have to do is pick the best time and date for you and we’ll do the rest on your behalf.