Common insolvency terms defined
A Company Voluntary Arrangement (CVA) is the principal alternative to liquidation. The company voluntary arrangement is a formal arrangement with the company’s creditors typically being paid over a 5 year period, repaying a fixed amount which is lower than the actual outstanding debt, which allows a business to continue to trade whilst repaying its debts at an agreed rate.
CVL is short for "Creditor's Voluntary Liquidation".
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In the UK a limited company is a company with limited liability amongst its owners. Therefore the company's shareholders are not liable for more than their investment in the event of insolvency proceedings such as liquidation or administration.
When a company is solvent, it is controlled by the Directors. When a company is insolvent, the Directors can place the company in the hands of a Liquidator, who then deals with the Liquidation. The Directors duties and powers cease, and they can move on to new opportunities, (having learned a few hard lessons along the way).
A Member's Voluntary liquidation or MVL is a solvent liquidation by a limited company that will pay everything due to it's creditors, employees, and shareholders, aswell as any tax owed. Visit our MVLDirect website for more information on Members Voluntary liquidation.
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Voluntary Liquidation is a liquidation (of a limited company) that is supported by the company shareholders (hence the term voluntary). There are 2 types of voluntary liquidation; Members Voluntary Liquidation and Creditors Voluntary Liquidation.
A public limited company (PLC) is a kind of public company (publicly held company) in the UK. It is a limited (liability) company whose shares are freely sold and traded to the public, with a minimum share capital of £50,000.
A Limited Liability Partnerships or LLP is a corporate business vehicle that gives the benefits of limited liability but allows its members the flexibility of organising their internal structure as a traditional partnership.
A test for insolvency is where the assets of the company are worth less than the liabilities, which is known as balance sheet insolvency.