Director Conduct in a CVL — What Liquidators Review and Why It Matters
For many directors, the phrase “liquidator review” is one of the most anxiety‑inducing aspects of a Creditors’ Voluntary Liquidation.
At Keywood Group, this is often the first concern raised in initial conversations: “Will I be personally at risk?”
Understanding what liquidators are required to review — and what typically causes issues — can significantly reduce uncertainty and stress.
Why Director Conduct Is Reviewed
In every CVL, the appointed liquidator has a statutory duty to review the conduct of directors in the period leading up to insolvency.
This review is not designed to be punitive. Its purpose is to:
- Ensure directors have acted responsibly
- Identify any misconduct that has worsened creditor losses
- Confirm whether further investigation or reporting is required
In the vast majority of cases, no adverse findings are made.
What Liquidators Actually Look At
The review typically focuses on a small number of key areas:
- Trading while insolvent — whether losses were increased unnecessarily
- Payments to creditors — particularly preferences to connected parties
- Director loan accounts — including overdrawn balances
- Asset disposals — whether assets were sold at undervalue
- Books and records — whether adequate financial records were maintained
Poor outcomes are usually linked to a pattern of behaviour — not a single mistake.
What Does Not Usually Cause Problems
Directors often worry about issues that, on their own, rarely lead to action:
- A business failing due to market conditions
- Attempting to trade out of difficulty in good faith
- Paying essential suppliers to keep the business operating
- Taking professional advice
Good intentions combined with reasonable decision‑making matter.
How Early Advice Reduces Risk
One of the most effective ways to reduce director risk is to seek licensed advice before matters escalate.
At Keywood Group, we help directors:
- Identify risk areas early
- Document decisions appropriately
- Avoid actions that could later be challenged
- Enter a CVL at the right time
Timing and transparency are critical.
Final Thought
Director conduct reviews are a normal part of the CVL process — not something to fear.
Handled correctly, a CVL can be a protective step, allowing directors to draw a clear line under a difficult period.
