Creditors voluntary liquidation, or CVL, is the formal process by which an insolvent company in England and Wales is wound up by the directors and shareholders themselves, without a court petition. The shareholders pass a winding-up resolution, a licensed insolvency practitioner is appointed liquidator, the company stops trading, and the assets are realised for distribution to creditors under the Insolvency Act 1986.

There were 1,585 creditors’ voluntary liquidations in England and Wales in June 2025 alone, accounting for 78% of all company insolvencies in the month. CVL is the most common way an insolvent English or Welsh company is wound up. The article below focuses on the statutory framework, the process, the realistic timeline, employee rights, and the personal exposures directors face.

Summary

• What Is Creditors Voluntary Liquidation?
• How Does the Creditors Voluntary Liquidation Process Work?
• What Is the Creditors Voluntary Liquidation Timeline?
• What Are the Employees’ Rights in a Creditors Voluntary Liquidation?
• What Are Directors Duties in a CVL?

What Is Creditors Voluntary Liquidation?

A creditors voluntary liquidation is a shareholder-initiated winding up of a company that cannot pay its debts. The directors conclude that the company is insolvent, the shareholders pass a resolution to wind up under section 84 of the Insolvency Act 1986, a licensed insolvency practitioner is appointed as liquidator. In most circumstances, the company ceases to trade from the date of the resolution; however, there are circumstances where limited trading may continue if it is necessary to preserve the company’s assets or goodwill for the benefit of creditors.

A CVL is different from a members voluntary liquidation (used where the company is solvent and can pay all its debts within 12 months), from compulsory liquidation (where a creditor petitions the court under section 122 of the Insolvency Act 1986), and from company administration, whose primary objective under Schedule B1 is company rescue rather than wind-up. It is also crucial to note that unlike in administration or compulsory liquidation, there is no automatic moratorium on legal proceedings against the company in a CVL, although the liquidator may apply to the court to stay such proceedings.

How Does the Creditors Voluntary Liquidation Process Work?

The creditors voluntary liquidation process runs in a defined sequence. Directors take advice from a licensed insolvency practitioner, convene a board meeting to resolve that the company is insolvent, and shareholders pass a special resolution to wind up under section 84 of the Insolvency Act 1986. Within seven days, the directors must prepare a statement of affairs under section 99 and put the choice of liquidator to the creditors.

Under section 100 of the Insolvency Act 1986, as amended by the Small Business, Enterprise and Employment Act 2015, the company may nominate a liquidator at the shareholders’ meeting, and the creditors may nominate their own “in accordance with the rules”. If the two choices differ, the creditors’ nominee takes office unless a director, member or creditor applies to court within 7 days. Creditor decisions now run through the procedures in Part 15 of the Insolvency (England and Wales) Rules 2016: deemed consent, correspondence, electronic voting, virtual meeting, or (only on 10% creditor request) a physical meeting. The mandatory physical creditors’ meeting under the old section 98 has been abolished since 2017.

Once appointed under section 100, the liquidator takes office and directors’ powers cease under section 103 of the Insolvency Act 1986. The liquidator realises the assets, adjudicates on claims, and pays dividends in the statutory order in section 175 and Schedule 6: 

• fixed-charge holders, 
• liquidator’s costs, 
• preferential creditors (including HMRC for certain taxes since 1st December 2020),
• floating-charge holders,
• unsecured creditors,
• interest, 
• shareholders. 

Progress reports follow under section 104A; a final account under section 106 closes the process.

What Is the Creditors Voluntary Liquidation Timeline?

The creditors voluntary liquidation timeline breaks into three phases: pre-appointment (two to three weeks), active liquidation (typically six to 18 months), and closure (three months to dissolution). Rule 15.11(1) of the Insolvency (England and Wales) Rules 2016 requires a minimum of three business days’ notice of the decision procedure. In practice, 14 to 21 days is realistic once the statement of affairs is prepared. The actual notice period depends on the company’s circumstances and the liquidator’s discretion, provided the statutory minimum period of three days is met

The active phase depends on the assets. A company with a small book of debtors, a lease to disclaim, and no property can be substantially wound up within six to nine months. One with property, retention of title claims, disputed creditor claims, or antecedent transactions to investigate under sections 238 to 245 of the Insolvency Act 1986 can take 12 to 24 months. Mid-sized trading company CVLs commonly close inside 15 months, with dissolution three months after the final account is filed.

What Are the Employees’ Rights in a Creditors Voluntary Liquidation?

Creditors voluntary liquidation employees’ rights are set out in the Employment Rights Act 1996 and delivered through the Redundancy Payments Service. On appointment, the liquidator will normally dismiss all employees because the company has ceased to trade. Employees with two or more years of continuous service qualify for statutory redundancy pay under Part XI of the Employment Rights Act 1996.

Because the company is insolvent, the state steps in. Under Part XII of the Employment Rights Act 1996, employees can claim from the National Insurance Fund for statutory redundancy pay, statutory notice pay, up to 8 weeks’ arrears of wages, and up to 6 weeks’ accrued but untaken holiday pay. The claim is made on Form RP1 online. The statutory cap on a week’s pay is £751 from 6th April 2026, uprated each April.

Employees are also preferential creditors for arrears of wages up to £800 and for holiday pay, under Schedule 6 of the Insolvency Act 1986. Amounts above the statutory caps sit as unsecured claims. The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) do not usually transfer contracts in a CVL because the proceedings are “with a view to liquidation of the assets” under regulation 8(7).

What Are Directors Duties in a CVL?

Once insolvency becomes probable, the directors’ duty under section 172 of the Companies Act 2006 shifts to the interests of creditors as a whole. In BTI 2014 LLC v Sequana SA [2022] UKSC 25, the Supreme Court confirmed that this “creditor duty” is engaged when the company is insolvent, bordering on insolvency, or an insolvent liquidation or administration is probable.

Lord Reed stated at paragraph 88 of Sequana: 

“I am inclined to agree with Lord Briggs and Lord Hodge that the probability of an insolvent liquidation or administration is also sufficient for the creditors’ interests potentially to diverge from those of the shareholders and therefore to require separate consideration.”

The creditor duty is not owed directly to the creditors. It remains a duty to the company, modified to include creditors’ interests as opposed to simply promoting the success of the company for the benefit of its members.

Once directors know the company is heading into CVL, decisions must be taken with creditors’ interests in mind. Continuing to trade at a loss, paying favoured creditors ahead of others, and disposing of assets outside the ordinary course all become high-risk. Sections 213 and 214 of the Insolvency Act 1986 expose directors personally for fraudulent and wrongful trading; sections 238 to 245 allow the liquidator to unwind transactions at an undervalue, preferences, and floating charges given for existing debt.

In our own dispute resolution and insolvency work, one pattern comes up repeatedly: directors take advice a fortnight too late, having made one or two payments to a familiar supplier in the final weeks. Those payments become the first thing the liquidator investigates. To avoid this type of scenario, clients should take early legal advice and have a paper trail showing the directors pursued creditors’ interests once insolvency became likely.

Talk to Witan Solicitors

If you are a director considering a creditors voluntary liquidation, or a creditor facing one, our insolvency and corporate recovery team can advise on the process, the timeline, and the personal exposures. Early advice materially changes outcomes, both for the company and for the directors personally.

To talk to one of our Insolvency Law Solicitors, please phone 0300 303 2071.

FAQs

Is a Creditors Voluntary Liquidation the Same as Bankruptcy?

No. Bankruptcy applies to individuals under Part IX of the Insolvency Act 1986. A creditors voluntary liquidation is a corporate procedure that winds up a limited company. The two are separate regimes with different consequences for the parties involved.

How Long Does the Creditors Voluntary Liquidation Process Take?

The pre-appointment stage runs two to three weeks. The main asset-realisation and creditor-adjudication stage takes six to 18 months on a typical trading company, and longer where property, disputed claims, or director conduct investigations are involved. Dissolution follows three months after the final account is filed.

Can Directors Be Held Personally Liable in a CVL?

Yes, in defined circumstances. Directors can be liable for wrongful trading under section 214 of the Insolvency Act 1986 if they carried on trading after they knew, or ought to have known, that insolvent liquidation was inevitable. Fraudulent trading under section 213, misfeasance under section 212, and disqualification under the Company Directors Disqualification Act 1986 are also available to the liquidator.

Last reviewed: July 2026.