When a company starts to struggle financially, it can be hard to know what options are available. There’s often a fear of the unknown, especially when legal terms get involved, but understanding the main insolvency procedures can make things feel a lot more manageable. Here are four of the most common routes companies take – and what each one actually means. Keep reading to find out more and to get the help you need if it’s required.

Creditors’ Voluntary Liquidation or CVL

This option is used when a company can no longer pay its debts and the directors agree it’s time to close. A formal resolution is passed, and a licensed insolvency practitioner steps in to sell the company’s assets. The money raised is used to pay off creditors. It’s never an easy choice, but a CVL can offer a structured way to wind down.

Company Voluntary Arrangement or CVA

When a business still has a chance of survival, a CVA might be the better fit. It’s a legally binding agreement between the company and its creditors to repay debts over time – usually with a clear and realistic plan. The company continues trading, and the directors stay in control. A CVA has to be approved by 75% of creditors, but it can be a lifeline when time and space are what’s needed most.

Administration

This is a rescue process where an administrator takes control to either help the business recover or sell it in a way that benefits creditors. The company is protected from legal action during this time, which can make all the difference, and if you’re exploring this route and looking for a London law firm?, it’s worth finding one with experience in administration cases.

Compulsory Liquidation

Unlike CVL, this happens when creditors take legal action and force the company into liquidation through the courts, and it’s usually a last resort. If you need advice, a London law firm that deals with insolvency can help guide you through the next steps. Hopefully, now you’ve got some information that can help.