Closing a company
CVL vs compulsory liquidation: what's the difference?
Short answer
A Creditors' Voluntary Liquidation is started by the company's own directors and shareholders, so you choose the timing and the licensed insolvency practitioner. A compulsory liquidation is forced on the company by a creditor's court petition, usually with a frozen bank account and an Official Receiver appointed. Both close the company, but one leaves you in control of the process.
Who starts each process?
A CVL starts with the directors deciding the company is insolvent and shareholders passing a resolution to wind it up. A compulsory liquidation starts with a creditor petitioning the court.
That single difference drives almost everything else: timing, tone, cost, and how the directors' conduct tends to be viewed.
How do they compare?
| CVL | Compulsory liquidation | |
|---|---|---|
| Who starts it | The directors and shareholders | A creditor, through the court |
| Timing | Chosen by the directors | Set by the court and the creditor |
| Who is appointed | A licensed insolvency practitioner chosen by the company | The Official Receiver, sometimes followed by an appointed liquidator |
| Bank account | Managed as part of the plan | Usually frozen once the petition is advertised |
| Employees | Can be handled in an organised way with redundancy claims explained | Often ends abruptly |
| Buying assets to continue the trade | Possible, at a proper value, through the liquidator | Much harder and far less controlled |
Which is better for directors?
A CVL is almost always the calmer route. It is the directors recognising the position and dealing with it, which is what company law expects once a company is insolvent.
It does not put a director beyond scrutiny. A liquidator still reviews conduct, still asks about a director's loan account, and still reports to creditors. But acting rather than waiting is a point in a director's favour.
What does each cost?
In a CVL the liquidator's fees are usually met from company assets where there are any, and the position is explained in writing before the directors commit. Where there are no assets, the funding position is set out plainly first.
A compulsory liquidation carries court costs and the petitioning creditor's costs, and the company has no say in how the process is run. Costs depend on your situation and are explained in writing before anything starts. The first conversation is free.
Reviewed by Michael O'Connor, M.A. (Cantab), MABRP
Director and lead adviser. Last reviewed 2026-09-25.
Common questions
Is a CVL the same as bankruptcy?
No. Bankruptcy applies to individuals. A CVL is the liquidation of a company, and it does not make its directors bankrupt.
Can I choose the liquidator in a CVL?
The company proposes a licensed insolvency practitioner, and creditors have rights in the process. On our cases, Mark Bassford FCA takes the formal appointment.
If a petition has already been issued, is a CVL still possible?
Sometimes, but the window is short and shrinking. Get advice the day the petition arrives.
Will either option stop me being a director again?
Neither does automatically. Disqualification follows serious misconduct, not business failure by itself.
Talk it through before you decide anything.
Free, confidential and informal. Michael replies personally, usually the same day.
Clear options for directors under pressure. One adviser, from the first call to the finish.
This page is general information, not legal or financial advice.