If you are looking to liquidate your limited company, whether voluntarily or not, the likelihood is that you will want to complete the process as quickly as possible and move on.
When you find yourself in this situation, it is first of all important to understand how the liquidation process works so you can ensure that all the necessary steps are completed. After all, the faster you complete all of the paperwork, the quicker your company can be closed down.
What is Liquidation?
Before we explain how long it takes to liquidate a limited company, it is first of all important to outline exactly what is meant by liquidation. Put simply, it is the process of closing down a business, usually with the help of a licensed insolvency practitioner, and having its assets liquidated to raise capital for creditors or shareholders.
There are two overarching branches of liquidation, which are compulsory and voluntary. The first is carried out at the behest of the company’s creditors, while the other is initiated by the business owners – either because they are unable to satisfy their debts, or they simply want to cease trading.
How Long does it Take to Liquidate a Limited Company?
The length of time it takes to liquidate a limited company depends largely on the method used to close the business down. On top of this, the exact time scale will come down the individual circumstances of each company. A firm that has a very complex and intricate financial structure could take a lot longer to dissolve than one which is more linear, for example.
If the company is insolvent, the number of creditors that are owed money is also an important factor. Dealing with multiple credits will be a lot more time consuming than if there were just one or two to satisfy.
A compulsory liquidation will begin when a company is issued a Winding Up Petition (WUP) by its creditors. While the process of sending the WUP to the business and the appointment of the Official Receiver can be quite fast, the entire time scale can be much longer than if the firm was closed down voluntarily. Not only that, but directors and shareholders will lose all of their power completely, including when choosing which licensed insolvency practitioner to work with.
In most cases of compulsory liquidation, the time between the initial threat of closure and the completion of court proceedings is usually around three months. However, this is only the length of time it takes to approve the closure of the business.
Once everything has been approved, the remainder of the liquidation process could take anywhere from three months to two years to complete. This is to account for things like the appointment of a liquidator, the sale of the company’s assets, agreeing with creditors’ claims and settling them.
There are two methods in which a company can be liquidated voluntarily – a creditors’ voluntary liquidation (CVL) or a members’ voluntary liquidation (MVL). The former is carried out when the business has debts it cannot satisfy and there is no viable way of continuing to trade, while the latter usually happens in circumstances where the director retires or does not wish to carry on with the business.
Creditors’ Voluntary Liquidation
In the case of a creditors’ voluntary liquidation, the process of approving the closure can typically take around 14 days to complete. As mentioned before, the exact length of time it can take depends entirely on the firm’s individual circumstances.
The process itself is broken down into several stages:
- Meeting with the insolvency practitioner
- The liquidator records the assets, reviews creditors’ claims and deals with the company’s staff
- The liquidator then conducts an investigation into the company’s affairs
- Once the final meeting has taken place, the liquidator will submit the required paperwork to Companies House
The firm will then officially be liquidated three months after the paperwork was sent to Companies House.
Members’ Voluntary Liquidation
When it comes to initiating a members’ voluntary liquidation, the process begins when a company director sends a statutory declaration of solvency to the Registrar of Companies. This states that the business has carried out a thorough investigation of its finances and is confident in its ability to repay all existing and contingent debts (plus interest) within the next 12 months.
Within five weeks of issuing the declaration of solvency, company directors must pass a resolution to officially start the liquidation process.
Once this has been completed, an advert must be placed in the Gazette for a creditors meeting to take place within the next 14 days. Creditors must be given at least one week’s notice before the meeting takes place. The resolution should also be lodged with the Registrar within 15 days.
Usually the company’s shareholders should receive around 75% of the liquidated funds within about three months of entering into the MVL process. The remaining balance is usually released after a further two months, once HMRC has cleared the case. The exact time it takes for the proceeds of the liquidation to be released also depends on the speed of which the bank sends funds over to the liquidator.
The end of the MVL procedure is formalised by the holding of the final meeting with the liquidator. The liquidator will then send the minutes of the meeting over to the London Gazette, after which the company will be struck off the Register once three months have passed.
What Happens Next?
Once the process has been completed, the liquidator will send a final report to creditors after it has investigated the company and the conduct of its directors. If the Insolvency Service chooses to launch an investigation, it can ask to keep the whole process open for longer.
Why Work with Inquesta
If you are looking to liquidate your company, you can rely on Inquesta to help. We have helped firms from all areas of industry close down their operations in the most efficient way possible.
We understand that no two companies are ever the same, which is why we will gain a thorough understanding of your circumstances to ensure we obtain the best possible resolution for you.
For more information about how Inquesta can help your business, contact our team today or request a free, no-obligation consultation.