Most directors and business owners are uncomfortable if they feel as if they don’t have a sense of control or agency over a situation.
It might be to do with being the main decision maker within their own company but some leaders don’t even like being driven about in cars or planes. This is why several CEOs and others take flying lessons and look to obtain a pilot’s licence because they literally enjoy steering themselves where they want to go.
While there are drawbacks with this leadership approach, they are offset by the strengths and benefits that a singular focus on command and control brings, especially in small firms where agility and speed can often offset more cumbersome business rivals.
Even if a business faces insurmountable financial challenges there is still a way of closing efficiently that allows the directors to maintain control of the process.
This is a Creditors Voluntary Liquidation (CVL) and we’ll explore why this could be the right solution if it’s the right option for you and your company.
Number of Creditors Voluntary Liquidation over the last five years
| Year | No. of CVLs |
| 2019 | 12,058 |
| 2020 | 9,490 |
| 2021 | 12,655 |
| 2022 | 18,825 |
| 2023 | 20,577 |
Figures from The Insolvency Service
Looking at the statistics for CVLs over the last five years we can see that at the beginning of the pandemic period from 2019 to 2020 the number of CVLs dropped by 21.3%. This was due to a combination of factors including government support for businesses including the staff furlough scheme, bounce back loans and temporary restrictions on creditors bringing actions against companies.
Combined with reduced court operations and an increasing backlog, it was to be expected that numbers would see a noticeable reduction.
However from 2021 onwards as the country recovered from the pandemic and the recovery measures were lifted there has been a consistent consecutive rise in the number of companies closing through a CVL.
In 2023, CVLs increased by 9% from their 2022 total to reach a new record high, 20,577 which is the highest annual number recorded since the beginning of the series in 1960.
Why choose a Creditors Voluntary Liquidation?
There are several other benefits for directors to select a CVL to close their business. These include:
- A proven and reliable controlled process
Unlike in a compulsory liquidation, directors retain some important elements of control over the process. They are able to appoint a liquidator of their choice to oversee the procedure and can also choose when they formally enter liquidation too.
- Protection from legal actions
Under UK insolvency law directors are legally obliged to be aware of their company’s financial position at all times. By initiating the liquidation themselves, directors demonstrate a proactive approach to dealing with the company’s financial difficulties while also limiting creditor losses as well as their own reputational damage as all legal actions are halted.
- Potential to claim director redundancy
In some cases, directors can claim redundancy pay on the liquidation of their company the same as any other member of staff if they satisfy certain conditions. These include:-
- If a director has worked as an employee for the company for at least two years;
- If they received all or part of their salary under PAYE and;
- If they worked for a minimum of 16 hours per week in a practical rather than an advisory role at the business.
- Debts written off
Upon completion of a creditors’ voluntary liquidation process, any unpaid company debts are written off. This means directors can typically move onto their next career venture without an additional historic debt burden following them.
If the first few months of 2024 haven’t gone as you’d expected or hoped for your business and your business is struggling then it is the perfect time to speak to one of our team of expert advisors about a creditors’ voluntary liquidation.
After a free initial consultation you’ll be in a stronger position in which to choose your next move with a wider range of options to follow than you might have originally thought.
Get in touch and pick the best time and date for you and we’ll do the rest to set up the discussion and help you regain control of you and your firm’s future.