Corporate Voluntary Liquidation is the process by which a company's assets are realised and distributed to any of those parties who are legally entitled to them, so that it can then be dissolved. A Corporate Voluntary Liquidation is one which has been instigated by the passing of a resolution of the shareholders, as opposed to a winding up order which is instigated by the court.
A Corporate Voluntary Liquidation is started by the directors recognising that the company is insolvent and should be placed into liquidation. A meeting of shareholders is convened to pass the resolution to place the company into liquidation and also to appoint a Liquidator.
At the same time as this happens, a notice convening a creditors' meeting under Section 98 Insolvency Act 1986 is sent to all those to whom money is owed. This meeting will be held (usually) immediately after the shareholders meeting unless this was held at very short notice. One stipulation of this is that a director must always be present at the creditors' meeting, and also preside as Chairman. The Liquidator must also attend the meeting. In the period between the calling of these meetings and actually holding them, it is extremely important that the directors take due caution and heed the advice of the Liquidator when appropriate. During the Corporate Voluntary Liquidation it is necessary not to improve or worsen the situation of any individual creditors, or dispose of any of the assets. In particular, it is vital to make certain that assets which ought to be available to the Liquidator do not in some way come into the possession of creditors and thus are made available for set off. For example, all cheques should be handed to the Liquidator and not paid into a bank account which is highly likely to be overdrawn. Because of the risks in such a situation it is probably the safest route for the company to stop trading immediately, and for the Liquidator to have effective control
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