How Long Does it Take to Liquidate a Company?
Closing your company is a delicate act which requires a lot of forward planning, so knowing how long it takes to liquidate a company is very important.
The amount of time it takes to liquidate a company depends on the method used and the complexity of the business.
In this guide, we’ll be exploring how long each method of company closure takes, how long a director has to be involved, and the factors you’ll need to consider going ahead.
Contents
How Long Does a Creditors’ Voluntary Liquidation (CVL) Take?
Creditors’ Voluntary Liquidations are the most common form of liquidation in the UK. They allow you to close down your business and uphold your directorial duties to creditors.
When a company is insolvent, it’s important to take expert advice on whether to cease to trade, and how best to practically do so, and to limit exposure to potential claims for wrongful trading or misfeasance. If found liable, directors can be made personally responsible for the repayment of company debts, hit with large fines, or disqualified from acting as a director again in the future.
Creditors are entitled to three clear business days’ notice of a proposed liquidation, however practically, the company will likely enter into liquidation 14 days after the directors resolve that it should.
How long the administration of the liquidation takes depends on the size of the business and the assets involved. In straight-forward cases this can often be within 6-9 months.
How Long Does a Members' Voluntary Liquidation (MVL) Take?
A Members’ Voluntary Liquidation is the most tax-efficient way to shut down a company with £25,000 or more in assets. Returns are subject to Capital Gains Tax rather than Income Tax, which can result in tax savings.
Prior to the MVL process the company should cease to trade and discussions will be held with the Directors/shareholders and their advisors on practical steps to be taken prior to the MVL process being formally commenced.
Often, and for a cost-effective and streamlined process, it is preferable for assets to be sold and creditors paid before the MVL process commences. However this is not always possible and an MVL can deal with both asset sales and creditor payments.
For the MVL Directors need to swear a Declaration of Solvency at a Board Meeting, shareholders pass a resolution to liquidate and appoint a liquidator. This is often all completed on the same date.
Once the company is in liquidation, the time it takes to complete is dependent on completion of the company’s tax affairs and any asset realisations. In straight-forward cases this can often be within 6-9 months.
How Long Does Compulsory Liquidation Take?
Compulsory liquidation takes place when a creditor petitions to have your company forcibly placed into liquidation to recover what they’re owed.
A creditor will petition to the Court, who will then fix a hearing date for a winding up hearing. The hearing date will depend on the Court’s availability, but the petition is advertised prior to the hearing.
How long a compulsory liquidation takes to complete depends on the scale of the business and the complexity of its affairs.
From the issuing of the winding-up petition and the beginning of the liquidation, it is usually around 3 months. For the complete liquidation of the company, however, it can take several years.
How Do I Know Which Option Is Right for Me?
Every company is different, so the answer varies on a case-by-case basis.
Generally speaking, you should get a Creditors’ Voluntary Liquidation if you need to close an insolvent business with debts and a Members’ Voluntary Liquidation when you need to close a solvent business with assets.
These options ensure the company’s affairs are settled properly, avoiding legal issues and stopping company assets from being assumed by the Crown. The liquidator can be appointed in as little as 2 weeks.
The only real way to find out which option is best for you and your company is to speak to an expert. Our insolvency practitioners can assess your situation and guide you to the best solution for you.
Get in touch today to book a free consultation.
