The Creditors’ Voluntary Liquidation Process
The term “creditors' voluntary liquidation process” (CVL) is used to describe a situation where the directors of an insolvent company request to be put in liquidation rather than face a creditor led liquidation. A CVL is the most common type of liquidation and allows the company’s directors to have some say over the winding-up of the business even though an independent liquidator will be appointed to be in charge of the process. The purpose of a voluntary liquidation is to pay off creditors by selling company assets. At the end of the process, the company is officially closed, or in some cases, may be restructured.
How to Proceed in a Creditors’ Voluntary Liquidation Process
Before proceeding in a creditors’ voluntary liquidation process, it is important to consult an attorney or tax expert, and keep in mind that laws differ from country to country. A voluntary liquidation is generally the next logical step once a company has no way to meet its financial obligations and is unable to pay creditors. For the CVL to be recognized, a majority of shareholders must agree to the liquidation. The next step is for a qualified liquidator to be appointed.
Once a liquidator is decided upon, the company must fully cooperate with him or her and provide all of the required financial documentation. The liquidator will then compile a comprehensive report on the current condition of the company. Common steps that are taken during a creditors’ voluntary liquidation are:
A detailed inventory and professional appraisal of all assets, including buildings and other real estate holdings. (Many times a third party asset recovery and disposition company is called in to assist with the selling of the assets)
Agreements are made between the company and creditors regarding outstanding bills and creditors are provided with timely reports on the progress of the liquidation
Payments are disbursed to creditors as funds become available
Since a company most likely ceases to conduct business, employees are terminated but may have some recourse to recover lost wages by bringing damages
Fees for the liquidator and the administrative process are determined and will come out of the proceeds of the sale of the company’s assets
Rabin is an international company that specializes in creating liquidity for complex manufacturing facilities with idle or marginally productive assets. Rabin’s operations include selling entire plants, multiple plant locations, or surplus individual items by auction or liquidation and much more. Past auctions include recognizable names such as Hostess, Braniff Airlines, Montgomery Ward, and the Railway Express Agency. Please contact us to learn how our services can be tailored-made to meet the needs of your creditors’ voluntary liquidation process.