A Creditors Voluntary Liquidation (CVL) is instigated by the directors of a company who, having reached the conclusion that the company is insolvent and cannot be rescued, resolve to call meetings of shareholders and creditors to place the company into liquidation. It is usual that the directors will appoint a Licensed Insolvency Practitioner to assist with the procedures to comply with the Insolvency Rules.
The Liquidator is not formally appointed until the shareholders have passed a resolution to place the company into liquidation and confirm the appointment of the liquidator. The creditors will have the opportunity either to confirm that appointment or reject it through the insolvency procedures utilised by the Insolvency Practitioner engaged by the Directors.
Following the Liquidator’s appointment, it is his duty to realise the assets of the company, investigate its affairs and report to the Insolvency Service upon the conduct of the directors; agree creditors’ claims and distribute the proceeds to the creditors in the order of priority laid down in the Insolvency Rules.
Liquidators of insolvent companies have wide ranging powers to assist them in both tracing assets and investigating the company.