How long does it take to liquidate a company?

The time it takes to liquidate a company depends on several factors, such as the type of liquidation procedure used, the complexity and size of the business, and the number of assets or debts involved.

If your company is facing liquidation, knowing how long the process may take will help you plan for the future and create a suitable timeline for your exit. Here we outline the various liquidation procedures, what they involve and the timeframe you can expect. 

What is liquidation?

Liquidation is an official procedure used to close solvent and insolvent businesses. The company will cease trading and a liquidator will be appointed to wind up the company’s affairs. As part of that process, they will sell its assets so the proceeds can be used to repay its debts and any remaining funds are distributed among the shareholders. 

Different liquidation procedures are used depending on the company’s financial status and whether the directors initiate the liquidation voluntarily.  

• Voluntary liquidation - The directors can initiate a Creditors’ Voluntary Liquidation if the business has debts it cannot pay. If the company is solvent and the directors want to retire or no longer need the company, they can enter it into a Members’ Voluntary Liquidation.
• Compulsory Liquidation - The company’s creditors can apply to the court to force a company into Compulsory Liquidation when it cannot pay its debts. They will usually do so as a last resort to recover the money they are owed.      

What happens when a company enters liquidation?

The result of all three liquidation procedures is the same - the company ceases trading and its assets are sold to release funds to pay the creditors and shareholders. However, there are slight differences in how you get there. 

In a voluntary liquidation, the directors appoint the licensed Insolvency Practitioner they want to act as the liquidator. As a company director, you may be asked to assist them by handing over company records and financial information, but they will manage the process and ensure everything is done correctly.

They will bring any ongoing contracts to an end, settle any legal claims and value and sell the company’s assets. They will then repay the creditors in a strict order. In an insolvent liquidation, any debts the company cannot repay in full will be written off. In solvent liquidation, the remaining funds are distributed among the shareholders. Finally, the company will be removed from the official register at Companies House and cease to exist.

Compulsory Liquidation tends to be more stressful for the directors as the court will appoint a liquidator, which removes any control the directors have over the timing of the process. The liquidator will also scrutinise the conduct of the directors more closely to ensure there was no wrongdoing. However, the procedure will still end in the same way, with its assets being sold before the company is closed.  

How long does it take to liquidate a company?

There is no time limit for company liquidation. The process will take as long as required to achieve its aim. It all depends on the type of liquidation procedure involved, the size of the company and the complexity of its affairs.

For example, the voluntary liquidation of a solvent company with few assets could take less than six months. On the other hand, the most complex insolvent liquidation cases involving larger companies with intricate financial structures and numerous assets and creditors can take up to two years or more. 

How long does Members’ Voluntary Liquidation take?

Members’ Voluntary Liquidation is usually the quickest procedure to complete. It can take as little as three months for small businesses with few physical assets or up to one year for companies with creditors to repay and more assets to sell. 

The following processes are involved in an MVL:

• Appoint an Insolvency Practitioner 
• Make a Declaration of Solvency and send it to Companies House
• Hold a shareholders’ meeting to make a winding up resolution
• Inform the creditors (if there are any) and advertise the liquidation in the Gazette
• Sell the assets and distribute the funds to the creditors and shareholders
  Remove the company from the official register  

It is common for companies in an MVL to repay creditors before appointing a liquidator as it reduces the interest payable on the debt. That can also speed the process up.

How long does Creditors’ Voluntary Liquidation take?

Creditors’ Voluntary Liquidation (CVL) typically takes longer than an MVL as there are usually more creditors to repay. The liquidator must hold meetings with the creditors to explain how the process will proceed. They must also invite claims from the creditors and review them to ensure they are valid. 

Most CVLs typically take six months to a year to complete, although they can take longer if there are lots of creditor claims, ongoing disputes to resolve and complicated assets to realise. 

How long does Compulsory Liquidation take?

Given the same circumstances, Compulsory Liquidation typically takes longer than a CVL due to the various court procedures involved. The first stage of the process is for a creditor to issue your company with a Winding Up Petition. There will then be a winding up hearing to decide whether the company should be liquidated. If the court issues a Winding Up Order, an Official Receiver will be appointed to act as the liquidator and the liquidation process can begin. 

Just like a CVL, the liquidator will invite claims from the creditors and sell the company’s assets to repay the debts as much as possible before closing the business down. The process typically takes anything from six to 24 months depending on its complexity. 

What’s the quickest way to close a company?

Liquidation is not the only procedure you can use to close a limited company. The other main option is called Strike Off or Company Dissolution. It’s quick, potentially leading to the closure of your business in around three months, and there are no liquidation fees to pay. 

However, you can only dissolve your company if it is solvent. And even if it is solvent, it may not be the most tax-efficient company closure method if you have significant retained profits or assets to distribute to the shareholders. 

How can I liquidate my company as quickly as possible?

Rushing the process of liquidating your business can lead to mistakes and oversights with serious financial and legal complications. If you want to liquidate your company quickly and correctly, seek advice from an Insolvency Practitioner at your earliest opportunity. They will guide you through the process and handle every aspect of the procedure efficiently and effectively.  

Receive prompt company liquidation advice

As the UK’s largest firm for company liquidations, we are perfectly placed to guide you through the liquidation process while advising you on the steps you can take to protect your interests. Get in touch for a free, same-day consultation or arrange a meeting at one of our 100+ offices throughout the UK.