How Long Does it Take to Liquidate a Company?

Liquidation is the process of winding up and formally closing a company’s affairs. It involves the orderly sale of a company’s assets, the settlement of its liabilities, and the distribution of any remaining funds or assets to its stakeholders, such as shareholders or creditors. But how long the process will take?

This article will break down the process into clear steps, giving you a better idea of the timeframes involved in each stage of liquidating a company.

How Long Does Liquidation Take?

Liquidation procedures can take anywhere from six months to several years, based on the complexity of assets and creditor claims. Most liquidations are completed within a year.

There is no set time limit. Liquidating a company involves several steps, each contributing to the overall timeframe required. It’s important to understand that this process can often be longer than anticipated.

1. Appointing a Liquidator: This first step can take around 3 to 4 weeks under normal circumstances. However, if there is an agreement from over 90% of the shareholders, the process can be expedited, potentially reducing this period to just seven days.
2. The Liquidation Itself: Once appointed, the liquidator must undertake various tasks such as selling off assets, conducting investigations, and handling all necessary paperwork. This part of the process can extend from several months to two years, especially in larger liquidations where more complexities are involved.
3. Compulsory Liquidation Timeline: In scenarios where compulsory liquidation is required, the period from the initial filing to the finalisation of court proceedings typically spans about three months.

The duration of liquidation procedures can vary significantly, from a few months up to a year or more, depending on factors like the speed of the liquidator’s appointment, the asset liquidation process, and the resolution of creditors’ claims.

It’s crucial to understand that there is no statutory time limit on business liquidation. The timescale can vary widely based on your company’s specific circumstances and the type of liquidation being carried out.

If you’d like to talk through your specific situation, please call 0800 074 6757 or email info@companydebt.com for free and confidential advice from one of our professional advisers.

How Long Does a Creditors’ Voluntary Liquidation (CVL) Take?

In general, the timeframe for completing a CVL (voluntary liquidation by directors) typically spans from 6 to 24 months, encompassing various key stages:

• 1-2 weeks to appoint a liquidator
• 14 days to actually place the company into a voluntary liquidation.
• 1 year to complete the liquidation so that all assets have been realised and the proceeds distributed to creditors (or even longer where big companies are concerned.)
•  6-24 months to liquidate a company from start to finish.

How Long Does Compulsory Liquidation Take?

On average, the compulsory liquidation process unfolds over a span of 6 to 24 months and includes the following key milestones:

• 7 working days to respond when a creditor serves your limited company with a winding up petition
• 14 days notice is the minimum you’ll be given for the court hearing.
• 6-24 months if the petition becomes a winding up order and the company enters liquidation.

How Long Does a Solvent or Members’ Voluntary Liquidation Take?

Closing a solvent limited company via a member’s voluntary liquidation typically takes between six months and one year, although this will vary depending on the complexity of the business assets.

The MVL timeline is as follows:

• The process begins with a declaration of solvency, after which directors have 5 weeks to begin liquidating the company.
• A creditors meeting must happen within 14 days of the resolution to wind up being passed.
• Shareholders should receive funds within 3 months.
• Proceeds of the liquidation are typically distributed in 3-6 weeks.
• After the MVL final meeting, the liquidator sends notice to the Gazette, and the company strike off happens within 3 months, ending the process.

Why Choose a Creditors’ Voluntary Liquidation (CVL) Over Compulsory Liquidation?

Facing insolvency is a difficult situation for any company. However, when closure becomes inevitable, taking charge through a Creditors’ Voluntary Liquidation (CVL) offers significant advantages compared to waiting for a forced closure via compulsory liquidation. Here’s why a CVL might be the better course of action:

• Maintain Control: A CVL allows directors to choose the timing and initiate the liquidation process themselves. This provides greater control over the company’s narrative and assets compared to a compulsory liquidation, which is triggered by creditors and overseen by the court.
• Reduced Risk for Directors: Directors have a legal duty to act in the best interests of creditors once a company becomes insolvent. Initiating a CVL demonstrates a proactive approach to fulfilling this obligation and can potentially reduce the risk of accusations of wrongful trading.
• Potential for a Better Deal for Creditors: A CVL allows for a more orderly sale of assets and potentially a higher return for creditors compared to a forced sale in a compulsory liquidation. This can foster goodwill and minimise legal challenges later.
• Swifter Closure: By taking charge, a CVL can expedite the closure process, minimising ongoing costs and liabilities associated with a failing business. This allows stakeholders, including employees, to move forward more quickly.
• Avoidance of the Official Receiver: A CVL lets directors appoint their own licensed insolvency practitioner to oversee the liquidation. This can be preferable to having the process controlled by the Official Receiver, a government appointee, in a compulsory liquidation.

While a CVL can offer these benefits, it’s crucial to seek professional guidance to determine the best course of action for your specific situation.

Here at Company Debt, we offer a free consultation to any directors wishing to gain clarity and guidance on your business situation. Our experts have helped 1000’s of directors navigate financial difficulty with practical advice and support.

FAQs about the timeline of the liquidation process