Creditors’ Voluntary Liquidation (CVL) is a formal insolvency process initiated by the directors of a financially distressed company. It involves the appointment of a licensed insolvency practitioner to oversee the liquidation of the company’s assets and distribute the proceeds among its creditors in an orderly and regulated manner.

Companies choose CVL when they are unable to meet their financial obligations and believe that liquidating assets and winding down the business is the most appropriate solution. By opting for CVL, the directors take proactive steps to settle debts and ensure a controlled closure rather than waiting for creditors to force the company into liquidation.

CVL is a voluntary process initiated by the directors, while compulsory liquidation is imposed by creditors or the court due to unpaid debts. CVL allows directors to have more control over the process and demonstrates a responsible approach towards addressing financial difficulties.

The CVL process involves several key steps, including convening a board meeting to propose liquidation, obtaining shareholders’ approval, appointing an Insolvency Practitioner (IP), and realising the company’s assets. The appointed IP distributes proceeds among creditors based on their priority and secured status.

Upon the decision to enter CVL, the directors select a licensed Insolvency Practitioner (IP) to oversee the process. The IP’s role involves valuing and liquidating assets, settling debts, ensuring regulatory compliance, and managing communication between the company and its creditors.

Creditors benefit from CVL by having a structured and transparent process for debt settlement. The involvement of an Insolvency Practitioner (IP) ensures a fair distribution of available assets, enhancing the chances of recovering owed funds compared to other debt collection methods.