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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.
If you’re asking yourself “how long does it take to liquidate a limited company”, it is first important that you understand exactly how the liquidation process works in the first place, so you can ensure that all the necessary steps are completed and no corners are cut in the pursuit of efficiency.
The following blog will first discuss what company liquidation is, before moving on to how long it takes, and what happens after liquidation.
How Long Does it Take For a Company to Liquidate?
The length of time it takes to liquidate a limited company depends largely on the method used to close down. On top of this, the exact time will come down to your individual circumstances. For example, a firm with a complex, intricate financial structure will likely take longer to dissolve than one with a more linear structure.
If the company is insolvent, the number of creditors that are owed money will also be an important factor in determining how long it takes to liquidate. Dealing with multiple creditors will be significantly more time-consuming than if there were only one or two.
As mentioned above, the length of time for a company to liquidate will be most affected by the method used, for example:
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 timescale can be much longer than if the firm was closed down voluntarily.
Once this method is pursued, all directors and shareholders will lose all of their power within the business, 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 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 process can take anywhere from three months to two years to complete. This time variation will depend on factors such as the appointment of a liquidator, the sale of company assets, agreeing with creditors’ claims and settling them, etc.
There are two primary methods in which a business can be liquidated voluntarily — a Creditors Voluntary Liquidation (CVL) or a Members Voluntary Liquidation (MVL).
A CVL is carried out when the business has debts that it cannot satisfy and there is no clear, viable method of continuing to trade. Alternatively, an MVL will take place in circumstances where the director retires or no longer wishes to carry on with the business.
Creditors’ Voluntary Liquidation
When it comes to Creditors’ Voluntary Liquidations, the process of placing the company into a CVL can take as little as 14 days. However, completing the liquidation is a process that will often take between 6-24 months depending on the size of the firm and its individual circumstances.
The process of a CVL can be 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 be officially classed as liquidated three months after the paperwork has been sent.
Members’ Voluntary Liquidation
In a scenario where all company liabilities have been settled before the official appointment of an insolvency practitioner, and all required information is on-hand and provided, the process of distributing company assets could be a matter of weeks. However, estimating the time for total closure and dissolution is more difficult and dependent on your firm’s situation.
The MVL process begins when the company directors send a statutory declaration of solvency to the Registrar of Companies. This document states that the business has undertaken an investigation of its finances and is confident in its ability to repay all existing and contingent debts (plus interest) within the coming 12 months.
Within five weeks of issuing the declaration of solvency, directors must pass a resolution to officially begin the liquidation process. Once this has been completed, an advert must be placed in the Gazette noting a creditors meeting that will be taking place in the next 7-14 days.
Usually, the company’s shareholders will receive around 75% of the liquidated funds within about three months of entering into the MVL process. The remaining balance is typically 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 with 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 After Liquidation?
What happens after liquidation depends on the ultimate outcome of the liquidators’ final investigation into the conduct of the company and its directors. If there are no concerns regarding the actions of directors, then no penalty will be attached. However, if the practitioner opts to conduct a further investigation, the entire process can be expected to remain open for longer.
Once the liquidation process has been completed and the company in question no longer exists, the liquidator will undertake an investigation into the company and its directors. Once this is complete, they will send a final report to creditors.
With your business now liquidated, you would be free to open another business, provided you have not been disqualified from being a director. If you are planning to go down this route, it is recommended that you consult with your insolvency practitioner first — especially if you are planning to remain in the same industry or use a similar name.
There are many complex rules surrounding these so-called ‘phoenix companies’, so it is essential that you obtain independent expert advice as soon as possible. This is key to ensuring that you remain covered and protected against any eventuality.
Why You Should Work with Inquesta
If you are looking to liquidate your company, it is important to work with a firm you know you can trust. Our dedicated team of expert advisors have decades of experience in helping firms from all areas of industry and all shapes and sizes to close down their business in the most efficient way possible.
At Inquesta, we understand that no two companies are ever the same, which is why we always aim to conduct a thorough investigation into your circumstances to ensure that we can gain a clear understanding of your business from top-to-bottom. This allows us to ensure that we obtain the best possible resolution for you. For more information about how Inquesta can help with liquidating your limited company, contact our team today or request a free, no-obligation consultation.