How Long Does It Take to Liquidate a Company?
If a company is struggling financially and can no longer pay its debts, it may be necessary to close the organisation. Company assets are sold to pay creditors, and the business is removed from the Companies House register. In some cases, the directors may choose to close the company for other reasons, such as retirement or to concentrate on another business venture.
Whatever the reason for closure, the winding down process must follow a series of precise steps. When considering how long does it take to liquidate a company it’s helpful to understand the timeline and procedures.
What Happens When a Company Goes into Liquidation?
Whatever the reason for liquidation the following steps will apply.
1. Experienced Guidance of a Licensed Insolvency Practitioner (IP)
The IP acts as the liquidator. They will advise you of the best options for your company and requirements, and oversee the entire process. They will also keep the creditors informed throughout the proceedings.
2. Valuation of Assets and Payment to Creditors
The IP assesses the value of all company assets and sells them. The proceeds are distributed to creditors to satisfy company debts as far as possible.
3. Distribution of Remaining Funds
If any money is left after debts have been repaid the IP distributes them to shareholders.
4. Closing the Business
The liquidator informs Companies House that the process is complete. The company is then removed from the Register.
How Long Does It Take to Liquidate a Company?
There are no legal requirements in terms of the timescale, so realistically, how long does a liquidation take? It may be possible to wind everything up in a matter of weeks, but several months to a year, or even longer, is more likely. It depends on the following factors:
- The type of business and financial complexity of the situation.
- The type of liquidation (there are several possible methods).
- Resolution of any outstanding legal disputes.
- Full cooperation of directors and creditors, or lack thereof.
- The time it takes to value and sell assets.
- The liquidators’ full access to all accounts and business records.
- The accuracy of these records.
How Long Does It Take to Close a Limited Company?
This depends on whether the business is solvent or in financial difficulties. In either case, the previous general considerations apply.
If the company is debt-free it can be dissolved by submitting a striking-off application to Companies House.
Providing the company hasn’t traded or changed its name over the last three months and there are no outstanding legal issues, it’s possible to close the business in approximately 3 months.
Alternatively, a debt-free business can be closed through the process of a members’ voluntary liquidation (MVL).
How Long Does a Members Voluntary Liquidation (MVL) Take?
This is a common method when shareholders retire or when the company has fulfilled its purpose and is no longer needed. How long does a voluntary liquidation take? The process can take anything up to 12 months, but a shorter timeframe may well be possible, depending on the complexity of the business.
These are the necessary steps (all timescales are approximate):
1. Declaration of Solvency
The company must be solvent and able to repay any debts within 12 months. If directors are sure of this, they must make a Declaration of Solvency as witnessed by a solicitor.
2. Appointment of an Insolvency Practitioner (Liquidator)
The process must be overseen by an IP acting as the liquidator, who assumes control of the business.
3. Preparing the Report for Creditors and Shareholders
The IP works with the directors to prepare a summary of the situation so that all interested parties are fully informed. These first three stages can take 5 – 6 weeks to complete.
4. Sale of Assets and Distribution
The IP values and sells the company assets and distributes the proceeds to shareholders. They also ensure that all creditors are paid in full. This stage can take 6 – 8 months.
5. Final Accounts
The insolvency practitioner submits the final company accounts to HMRC and informs directors and shareholders. This stage can take up to one month.
How Long Does a Creditor’s Voluntary Liquidation (CVL) Take?
If a struggling business can’t improve its situation and meet its financial obligations, a CVL can offer a way out. It allows an insolvent company to cease trading, sell its assets and hopefully repay some of its debts. This tends to be a last resort once all other options for recovery have been unsuccessful.
So, how long does company liquidation take in these circumstances? The timescale depends on the size of the company and the complexity of the situation. In general, it can take a minimum of three months to one year or even longer.
The process is very similar to the previous examples.
- Directors’ assessment and discussion with board and creditors.
- Creditors must agree to proceed with the CVL.
- Appointing an insolvency practitioner to oversee the process, sell assets and distribute funds to creditors.
- The IP must settle any legal disputes and assess if directors have acted correctly.
- Inform Companies House so the business can be removed from the register.
Legal disputes can potentially arise during any of these liquidation procedures. However, in the case of a CVL, the company has failed completely so its ability to repay creditors may be limited. This can easily give rise to legal challenges from disgruntled creditors, so the timeframe from start to finish may be hard to predict.
Irwin Insolvency – Expert Guidance for Your Company Liquidation
So, how long does liquidation take in the UK? This depends on whether the company is insolvent or debt-free and the overall state of the business. The type of liquidation process used also plays a major part. Solvent companies are likely to be quicker and easier to close down whilst struggling businesses have more complex issues to resolve.
Whatever your situation, an experienced Insolvency Practitioner will have the right solution for your business.
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