Explainer: The Economic Crime and Corporate Transparency Act
November 9, 2023
When a company can no longer pay its debts as they are demanded, its directors are under an obligation to take all possible steps to minimise the losses suffered by its creditors.
After seeking the appropriate advice, when the owners or Directors want to close down an insolvent company, the procedure is known as a Creditors’ Voluntary Liquidation or CVL.
When a company can no longer pay its debts as they are demanded, its directors are under an obligation to take all possible steps to minimise the losses suffered by its creditors which in most cases means closing down the business and putting the company into liquidation. Otherwise they run the risk of prosecution for wrongful trading.
So once it is clear that the situation is not just a short term cash flow problem, which can be rectified by securing new borrowing facilities, introducing new capital or by earning sufficient future profits, the directors must act swiftly to commence the procedure for a Creditors’ Voluntary Liquidation (CVL).
This will lead to the appointment by the shareholders and creditors of a liquidator who will sell the assets and distribute funds left after costs in accordance with the order of priority laid down by insolvency legislation. Although the choice of the liquidator lies with the creditors, it is the directors who nominate a licensed insolvency practitioner to assist with starting the CVL process and who is likely to become the liquidator in due course.
For more information on Creditors’ Voluntary Liquidation, we offer an initial free consultation to review the situation and make recommendations on the best way forward. If we think that Creditors’ Voluntary Liquidation is the best route forward, our specialists can support the business at every step of the way through the process.
Contact our Head Office on +44 (0) 20 3326 6454 to arrange a no obligation and confidential call with one of our Partners.
“Our firm has worked with Opus for many years and with one of the partners in particular, Jo Rolls. I have attended a number of meetings with Jo when our clients have needed guidance on restructuring their business at a time when they have been facing financial challenges. Jo has always demonstrated a clear understanding of the clients’ needs from the outset. Her attention to details and diligent advice have proved invaluable to the business at a time when the directors needed it most. I would have no hesitation in recommending Opus to anyone wishing to use their services”