What you’ve missed
Last week The Insolvency Service issued their latest corporate insolvency statistics for the month of August, where it is clear that the majority of company insolvency cases were Creditors Voluntary Liquidations (CVL), making up 86% of the total amount.
In fact CVL’s went up to 1,662 last month, which is an increase from 1,609 in July last month and the third highest monthly total since Jan 2019. This is up 33% on the same month a year ago and up 73% on Aug 2019 (pre-covid).
It’s the most commonly used insolvency procedure now – but why?
And why could it be the ideal one to close your business?
What is a CVL?
A Creditors Voluntary Liquidation (CVL) is when the shareholders or directors of a company make the decision to close it and place it into liquidation because they’re unable to pay their debts within a year and realistically have no way of changing the situation.
It has to be carried out by a licensed Insolvency Practitioner as it is a legal insolvency process.
The main attraction and benefit of a CVL is that all unpaid debts are written off at the end of the process, which means that creditor pressure stops and directors can typically move on to other ventures without the burden of debt following them.
This can also provide the solution to many outstanding problems and issues hanging over business owners or directors of a company facing hard times. This might include finding solutions for unpaid bounce back loans, leases, contracts, VAT arrears, overdue tax, rent and overdue business rates.
Another reason a CVL is favourable for directors is that it is a streamlined, tried and trusted procedure that can be initiated in as little as two working weeks from the initial meeting to business closure.
This is because all of the essential meetings can be conducted remotely, while the majority of required documentation can be securely uploaded, and if this isn’t plausible, the practitioner will provide a detailed list of what is required of them before anything is posted.
A CVL has certain legal obligations, which must be fulfilled during the process including an investigation into the directors conduct in the months leading up to the decision to liquidate.
It is important to note that this is a collaborative process with the practitioner who will ask pertinent questions but will also look for valid explanations and evidence to support those decisions taken for the benefit of the business at the time. They won’t look to trip up or catch out – they will help the directors provide any necessary evidence to support their records and statements. The Insolvency Service made the investigation segment mandatory so it’s better to be aware of it now rather than feel surprised during the process.
If a CVL sounds like it could be beneficial for you or your business then get in touch.
Once a business owner or director has their free initial consultation with one of our experienced advisors, they will better understand the range of options available to them, often more than they initially believed they had.
A CVL may still be the best option but others including administration might be a better initial strategy for them instead.
Whatever they decide, they have to act quickly – the longer they wait, the less options they will have and the less favourable the conditions to act under.
As we’ve seen this previous week – events can change very quickly so take advantage of the time you have now and contact us – today.