If during the administration of an MVL the liquidator finds that the company is after all not capable of paying all its creditors in full, the MVL must be converted to a CVL. Within 7 days from when the liquidator decided that the company is actually insolvent, they must send to the creditors a statement of the company's affairs. This statement of affairs has prescribed contents and must show the details of the company's assets, debts and liabilities, the details of the creditors and any securities held by them. The liquidator must verify the statement with a statement of truth.
Contrary to an MVL where the creditors have no interest in the conduct of the liquidation because their claims plus interest will be paid in full, the creditors in a CVL do have such an interest, as the costs of the liquidation and the value of the other claims against the insolvent company will affect the proportion of their debt that will be repaid. Therefore, the creditors may nominate a different person to be liquidator in the CVL instead of the current liquidator in the MVL. The liquidator will by notice, attached to the statement of affairs, seek this nomination from the creditors. The notice has prescribed contents, which includes details of the decision procedure or a deemed consent procedure to be used, when a response is required by, the identification and contact details of the existing liquidator and a statement to inform the creditors that if no one is nominated the current liquidator will become the liquidator in the CVL.
The decision procedures available to the liquidator are:
In the deemed consent procedure the liquidator will give the creditors notice of the matter they need to decide on and the proposed decision. If less than 10% in value of the creditors object to the decision, the decision will be regarded as having been made. If 10% or more in value object, the decision is not made. In this case, if a further decision is sought it must be taken using a decision procedure and not the deemed content procedure. If no new liquidator is nominated at the conclusion of these steps the existing liquidator will become the liquidator in the CVL.
At the same time that the liquidator seeks a nomination for a liquidator, they will also invite nominations form the creditors for membership of a liquidation committee.
The MVL becomes a CVL on the day that the creditors nominate a liquidator in the CVL or on the day on which the procedure by which the creditors were to have made the nomination concluded without a nomination being made. From this day the declaration of solvency originally made in the MVL will be regarded as never having been made.