Creditors' Voluntary Liquidation: What you need to know

What is a Creditors' Voluntary Liquidation?

A Creditors’ Voluntary Liquidation (CVL) is the liquidation of an insolvent company that is initiated by the director(s) of a company.  Under the Companies Act, directors faced with insolvency of their company are obliged to have regard to:

• The interests of the creditors.
• They must take steps to avoid the insolvency of the company, where possible.
• They must not deteriorate the financial position of the creditors or incur debts where the directors believe or have reasonable cause to believe that the company will not, or may not, be in a position to discharge them.

It also enables them to move on from potential difficult positions, as, once appointed, a liquidator is responsible for dealing with all stakeholders; including secured lenders, the Revenue Commissioners, employees and unsecured creditors.  

In a CVL, the liquidator is primarily concerned with investigating the reasons for the failure of the company and the conduct of the directors, including reporting to the Director of the Corporate Enforcement Authority, and realising the assets of the company to maximise repayment of creditor debts.  

A CVL brings the company to a close and deals with all outstanding company debts.   Whilst asset realisations will be maximised in order to provide a return to creditors, where a company enters CVL, there is likely to be a significant shortfall to creditors that will be written off upon the finalisation of the process.  

How is a liquidator appointed in a Creditors' Voluntary Liquidation?

1. Shareholder meeting: Once the directors have made the decision to proceed with a CVL, a meeting with the shareholders must be convened.
2. Creditor’s meeting: Following a meeting of shareholders, a meeting of the creditors is called by the company's directors for the purpose of confirming the appointment of a liquidator.
3. Liquidator appointed: Following the meeting of creditors and provided the creditors resolve for the Company to be wound up, the liquidation commences.

Practically, the directors call the meeting of shareholders and creditors at the same time, as both need the requisite notice periods. The shareholders’ meeting is generally held immediately prior to the creditors’ meeting.

In order for the meeting of creditors to be deemed valid, the following criteria must be met in advance:

• A notice of this meeting is circulated to the creditors at least 10 days in advance of the meeting, along with a general and special proxy form.
• Details of the proposed Liquidator is enclosed with the notice and proxies.
• A full creditors listing must be made available to any creditors that request same. 
• The meeting must be advertised in at least two national newspapers.

There are generally 3 items on the agenda of these meetings. 

1. A statement of affairs is prepared by the director(s) and presented to the creditors;
2. The creditors have a vote as to who they would like to appoint as the liquidator of the company; and
3. The creditors are given a chance to appoint a Committee of Inspection.  

A Committee of Inspection (“COI”) are a group consisting of at least three individuals (and no more than eight) that are generally creditors, although members and directors can also be on the COI.  They assist the liquidator with the process and provide a mechanism for the liquidators to obtain approval for payment of fees or to commence legal action during the course of the liquidation.

What is the liquidation process?

Once the appointment of the Liquidator has been confirmed, the Liquidator’s primary objective is to investigate the cause of failure of the company and to realise the value of the company’s assets to the best of their ability and distribute the proceeds of those realisations to the company’s creditors in order of their ranking

1. Secured creditors (banks, debt funders and asset-based lenders);
2. Preferential creditors (Revenue, employees); and 
3. Unsecured creditors (trade suppliers)

A summary of the process that the Liquidator must undertake in a CVL is:

• Take possession of the company's property including all books and records.
• Finalise the list of creditors, the value of their claims and resolve any Retention of Title issues.
• Ensure that employee claims are dealt with in a timely manner.
• Realise the assets of the company
• Investigate the reasons for the liquidation and submit findings to the ODCE making a recommendation as to the restriction or disqualification of company director(s).
• Report any suspected offence by the company or past or present officers or any member to the Corporate Enforcement Authority and Department of Public Prosecution, as applicable.
• Distribute the proceeds of any realisations to creditors based on their rankings.
• Filing of statutory documentation with the CRO, ultimately leading to dissolution and removal from the companies register.

How Grant Thornton can help you

We bring together a combination of business management, tax, accounting and company law skills to conduct efficient, orderly wind downs and distribution of assets in voluntary liquidations. We have advised many clients on group rationalisations, tax planning and restructuring for companies of all sizes, in all sectors of the Irish economy. 

Our Creditors’ Voluntary Liquidation specialists will guide you through every step of the CVL process and will;

• Assist you in putting your company into liquidation.
• Act as your liquidator for the company.
• Provide you with the best knowledge, skills and service needed for a CVL.
• Provide a low cost, high quality service for you.

Our services

Learn more about how our Creditors Voluntary Liquidation solutions can help you

Visit our Creditors Voluntary Liquidation page

If a company is insolvent, or likely to become insolvent, but there it has an underlying viable trading business it might be able to avail of the Small Company Administrative Rescue Process as a restructuring tool to avoid the need for liquidation.

A liquidation does not deal with personal guarantees, however, we can provide advice on this as needed with our Debt Solutions team.   

If a company is solvent but no longer has an ongoing business requirement, a Members' Voluntary Liquidation may be more relevant to your needs.