Creditors’ voluntary liquidation comes into play when the directors or shareholders of a company realise that the company’s debts cannot be repaid. Creditors’ voluntary liquidation- also known as CVL- can be a complicated and time consuming task that needs to be handled with care.
Process of Creditors’ Voluntary Liquidation:
• The directors of the company call a board meeting immediately, where it is announced that the company is no longer able to deal with its debts and that trade has to cease.
• The shareholders then come together to start the process of putting the company and its assets into liquidation.
• The creditors meeting must be summoned within a period of 15 days. This meeting is generally after the shareholders decide to shut the company.
The positives and negatives of a company must be considered prior to deciding on creditors’ voluntary liquidation. A benefit of CVL is that the company gets any of the VAT that is recovered.
Creditors’ voluntary liquidation needs a lot of thought, as dissolving the company’s assets is a major step that shouldn’t be taken lightly.