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. On average, it can take anywhere between 3 months and 1 year.
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.
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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 safely close down your business and uphold your directorial duties to creditors, protecting you legally and financially.
When a company is insolvent, it’s important to stop it trading as soon as possible to help avoid wrongful trading or misfeasance charges. 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.
Thankfully, you can enter into a CVL in as little as 2 weeks. This is the time it takes to appoint a liquidator. You can actually enter into a CVL within 7 days if you get your shareholders to sign a ‘Consent to Short Notice’ form.
The liquidation itself can take between 6 to 12 months. The time it takes depends on the size and complexity of the business. However, your involvement will be minimal at this point.
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 full-blown Income Tax, which results in huge savings.
It can take a while for the company to be completely shut down, but members can expect to see financial returns quickly.
Directors need to make a Declaration of Solvency, get the backing of shareholders, and advertise the pending liquidation in The Gazette. Once this is complete, control of the company is handed over to the liquidator, allowing them to sell the company’s assets.
Returns can be made to company directors and shareholders in as little as 3 months.
The complete closure of the company will likely take a little longer, typically around 6-12 months. However, director involvement will be minimal once control has been handed to the liquidator.
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.
You get 7 working days to respond when a creditor serves your company with a winding-up petition.
You then receive a minimum of 14 days’ notice of the court hearing.
If the court accepts the petition and issues a winding-up order, control of the company will be stripped from the directors and handed to a government liquidator known as the Official Receiver. They’ll sell the company’s assets so that the proceeds can be used to repay creditors. The process usually takes around 6-24 months.
It’s best to seek the advice of an insolvency practitioner when you first receive a winding-up petition – the compulsory liquidation process is likely to result in misfeasance and wrongful trading charges.
How Long Does a Voluntary Strike-Off Take?
Voluntary strike-off takes place takes place when a director completes a DS01 form to have their company removed from the Companies House register, ceasing its existence as a legal entity.
The process usually takes around 3 months from start to finish. This is because the strike-off must be advertised in The Gazette so that any creditors have the opportunity to object.
The company is then removed from the register and is closed.
The process is a quick and straightforward means of closing your company. However, unlike liquidation, it is only appropriate in very select circumstances.
If you have assets or debts, the process will not deal with them properly, and you risk losing your money or getting into legal trouble. It should only be applied to small, dormant companies without any real assets.
How Long Does the Compulsory Strike-Off Process Take?
A compulsory strike-off takes place when a company fails to comply with Companies House regulations. The business may not have updated its annual accounts on time or updated its current office address, etc. As a result, Companies House removes it from the register, ceasing its existence as a legal entity.
Companies House will first send you two letters of warning over the course of 2 months. These will explain the reason for the proposed removal.
If you don’t remedy the issue, a first notice for compulsory strike-off will be advertised in The Gazette. This gives creditors 2 months to object to the company being closed. If no objections are received, the company will be struck off the register and dissolved.
All in all, the compulsory strike-off process takes around 4 months.
Some directors allow a compulsory strike-off to go ahead on purpose to get rid of a company they no longer have use for. While you can technically do this, it’s important to remember that this is only appropriate for small, dormant, solvent businesses. Strike-off doesn’t deal with your company’s assets, so you risk losing money and encountering legal issues.
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.
