Creditors Voluntary Liquidation (CVL) Scotland

A Creditors Voluntary Liquidation is a way for company directors to wind up (close) an insolvent company. If the company is not financially viable and cannot pay its debts then a CVL is preferable to a Compulsory Liquidation.

Liquidation and Closure

Members Voluntary Liquidation


Creditors Voluntary Liquidation


Compulsory Liquidation (Winding Up)


What is a Creditors Voluntary Liquidation (CVL)?

There are two types of voluntary liquidation process in Scotland but only one is available to insolvent companies:

Your company must be deemed insolvent (unable to pay its debts) to be able to use a CVL.

A CVL is a common way for directors to voluntarily liquidate (release the assets of) an insolvent company. Once it is established that the company cannot pay its debts then it becomes a legal requirement of the directors to act in the best interest of the company’s creditors. This means using a licenced Insolvency Practitioner to liquidate the companies assets, close the company down and remove its name from the register at Companies House in Edinburgh.

There are many advantages to using the CVL process in Scotland. In particular it allows you to take control of your company’s debts before the situation becomes a Compulsory Liquidation. Compulsory Liquidations make up the majority of liquidations in Scotland, of which HMRC tax or VAT debts make up the biggest percentage.

It is not an easy decision for any director to make, but if you can face a worsening financial crisis head on you will be in a much better position to move forward later.

Remember, you are liquidating the company, not yourself. Failing to act in the best interest of the company’s creditors is seen as wrongful trading. Avoid this, and you can move straight onto a new project and company as soon as the liquidation is completed.

Is my company insolvent?

Evidence of an insolvent company can be established by using the following insolvency tests:

The Balance Sheet Test;

  • If the company owes more than it owns, this shows as a negative balance which can be used as evidence of insolvency.

The Cash Flow Test

  • If the company cannot pay the bills it is receiving then this can be used as evidence of insolvency.

Establishing that your company in insolvent rules out the option of using a Members Voluntary Liquidation (MVL)

What are the advantages of using a Creditors Voluntary Liquidation?

  • A licenced Insolvency Practitioner must be used – this guarantees professional advice and guidance throughout the whole process whilst ensuring all legal requirements are met.
  • Remove creditor pressure immediately – your IP will take over all communication with creditors and arrange settlements.
  • Avoid allegations of wrongful trading – the sooner you act, the less likely your actions can be perceived as anything but honourable.
  • Avoid creditors seeking court action – you remove the risk that your company will be forced into compulsory liquidation via a winding up petition granted by the courts.
  • Avoid deeper investigation – during a compulsory liquidation directors actions are scrutinised in much more detail to ensure proper conduct.
  • Avoid personal liability – personal liability risks are reduced once under the guidance of a licenced Insolvency Practitioner as all the correct measures can be taken at the appropriate times.

What is the Creditors Voluntary Liquidation process?

All meetings can be online and attendees do not need to be physically present.

Step 1. Contact us – Set up a call-back and speak directly with a qualified advisor. They can answer all your questions in a matter of minuets. We have access to the very best IPs throughout Scotland and pride ourselves in ensuring you receive the very best advice. All telephone consultations are FREE and confidential.

Once you have sought the advice of an Insolvency Practitioner you can relax in the knowledge that you are now making the right decisions. All future actions will be in the best interests of your company and your creditors whilst reducing the risk of any personal financial liability.

Step 2. Meeting of Board of Directors – the purpose is to officially record the decision and date at which the board has decided to liquidate the company as well as record who the IP is so they can begin to work on your behalf. It may help to have the IP join this meeting and be there to answer any questions you may have.

Stage 3. Pre Shareholders Meeting – details of the directors meeting are sent out to all creditors explaining the company’s intentions to use a CVL.
A Statement of Affairs outlining the company’s assets is made available to them and a meeting date is set for the upcoming meeting of creditors.

The company continues trading as liquidation has not yet begun and the directors remain in charge. You should assist your Insolvency Practitioner by preparing the required accounts and a Statement of Affairs. This enables them to prepare properly for the upcoming creditors meeting.

Step 4. Meeting of Shareholders – this is normally held just before the meeting of creditors, on the same day. If 75% of the shareholders agree then the company can proceed with a CVL. They will also vote confirming agreement on the choice of Insolvency Practitioner.

Step 5. Meeting of Creditors – this must be held within 14 days of the meeting of shareholders, however it is normally held on the same day, after the meeting of shareholders has concluded.

At least one director must attend. The IP will present the company’s Statement of Affairs to the creditors and confirm they are happy to proceed with the currently appointed IP. Creditors are given the right to change the Insolvency Practitioner should more than 50% of them disagree with the current choice. Agreement is concluded by voting.

Stage 6. Company Liquidation – after the creditors meeting the IP will begin the process of liquidating the company’s assets. Companies House will be notified to update their records and an advertisement will be placed in the Edinburgh Gazette.

In what order do creditors get paid?

Creditor settlements are made in accordance with the Bankruptcy Scotland Act (2016) and are made in the following order;

  1. Secured creditors with fixed charges
  2. Preferential creditors including staff wages
  3. Secured creditors with floating charges
  4. Unsecured creditors such as HMRC, suppliers and customers

The document relating to the Priority of Distribution can be found within the Bankruptcy Scotland Act (2016) on the Government website.

NB. It is important to note that you are allowed to purchase your own items back as long as they are bought at market value and through your Insolvency Practitioner.

How long does a Creditors Voluntary Liquidation take?

If your company is very small and has very few assets then it is possible to complete everything in as little as 3 months. Larger and more complex companies will take longer. Very large organisations can take over two years.

How much does a Creditors Voluntary Liquidation cost?

Prices for insolvency procedures will vary only in relation to the amount of work involved.

From £3,500 + VAT


Voluntary Arrangement



Members Voluntary Liquidation

Creditors Voluntary Liquidation

Compulsory Liquidation (winding up)

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We are a Scottish company who specialise in providing information and support to small and medium businesses throughout Scotland experiencing financial issues. We believe that your business is best served by a company that understands the local markets, laws and has in depth experience and knowledge of business recovery solutions and liquidation options.


0141 291 5040


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0141 291 5040


7 Days 9am – 8pm


Mon – Fri 9am – 5pm