A creditors' voluntary liquidation is the most popular mechanism for closing down a company which is insolvent.

With companies struggling to maintain profitability, and as a result not being able to pay their debts as and when they fall due, this is leading to many Creditors Voluntary Liquidation deciding to seek expert insolvency advice from a practitioner experienced in such matters. The area is very complex and an expert should be sought when exploring the various possibilities of recovery in whatever form that recovery will take.

The latest insolvency figures for the fourth quarter of 2008, published by the Insolvency Service shows that over 3,000 companies took the option of closing their doors by resorting to a creditors voluntary liquidation, or CVL. To put that into some kind of perspective, that was a 62% rise on the same period in 2007, which dramatically illustrates the down turn in the economy.

A director must be aware at all times that if the company is struggling, they cannot continue to trade with it unless they are very confident that they can ride out any adversity. If not, they must take steps to crystalize their losses and bring the company to an end (possibly to emerge again as a new company in order to preserve your income but without the shackles of the old company's debts, etc.)

This can be done in as little as three weeks from start to finish. Help with a creditors' voluntary liquidation will involve the preparation of a statement of affairs, showing creditors the state of the company and why it cannot continue to trade. They will be invited to a meeting at which they will be asked to vote that it be closed down. As this is so commonplace now, many creditors do not even turn up at a meeting but send in their vote by fax.

A report will be prepared on the conduct of the directors in relation to the running of the company and it is for this reason that it is imperative to take early advice when Creditors Voluntary Liquidation  deciding if the company needs to cease to trade. Any delay may lead to adverse comments on the report.

It is possible to arrange a pre-pack sale of the assets back to directors if it is important for the continued survival of trade. In this instance the insolvent shell will be wound up but a viable business will be preserved.