How long does it take to liquidate a company?

I want to liquidate my company - how long will it take?

No two liquidation cases are the same. While some liquidations can be completed in a matter of months, others can take several years. Most liquidations are concluded within 12 months.

Factors that can affect the timeline of a company's liquidation include the number of creditors involved, the level of debts involved, any contentious or litigious issues, director conduct including potential fraud and misfeasance, and the extent of director co-operation during the process.

What are the various liquidation procedures?

Liquidation is a formal process for closing a limited company. Acting as the liquidator, an Insolvency Practitioner will sell the company’s assets and distribute the funds to its creditors and shareholders. Employees will be made redundant, and the company will be removed from the official register and cease to exist.  

There are three company liquidation procedures in the UK:

• Members’ Voluntary Liquidation (MVL) - Members’ Voluntary Liquidation (MVL) is a procedure for closing a solvent company (one that can pay all its debts). It is usually the most tax-efficient closure method for companies with more than £25,000 in retained profits (assets and cash) to return to the shareholders.
• Creditors’ Voluntary Liquidation (CVL) - If your company cannot pay its debts when they’re due or its liabilities exceed its assets, it is insolvent. You can close an insolvent company voluntarily using a Creditors’ Voluntary Liquidation. The liquidator will sell the company’s assets and use the proceeds to repay as much of its debt as possible. They then close the company, and any debt they cannot pay will usually be written off.
• Compulsory Liquidation - Compulsory Liquidation is a court process initiated by a creditor (a lender, supplier, HMRC, etc.) when the company cannot pay its debts. The court can order the company to close, its assets will be sold to repay its creditors and it will be dissolved. 

How long does a Members’ Voluntary Liquidation take?

Typical duration: three to six months

Members’ Voluntary Liquidation (MVL) is usually the quickest of the three liquidation procedures. That’s because, as the company can afford to pay all its debts, there are fewer administrative and legal guidelines to follow. 

If there are no complex tax issues or assets, it can take as little as three months to complete. That rises to between six and 12 months where there are specialist assets to sell or a complex corporate structure.

A typical MVL timeline looks something like the following:

• Week 1 to 2 - Pre-liquidation planning involves an initial consultation with an Insolvency Practitioner (IP) and financial assessment to confirm the company’s solvency and tax affairs.
• Week 2 to 4 - You need to prepare and sign the necessary documents, including a Declaration of Solvency and financial statements. You must hold a board meeting to approve the liquidation.
• Week 4 to 6 - You hold a general meeting of shareholders to pass a special resolution to wind up the company, and the liquidation officially begins. You must appoint an IP to act as the liquidator. They file a notice of the resolution at Companies House and place an advert in The Gazette.
• Week 6 to 18 - The liquidator identifies and sells the company's assets, repays creditors in full and pays any tax due.
• Week 18 to 22 - The liquidator distributes the remaining funds among the shareholders, usually in one or two distributions.
• Week 22 to 26 - The liquidator then prepares a final account of the liquidation and files it with Companies House. The company is usually dissolved three months after the documents have been registered. 

How long does a Creditors’ Voluntary Liquidation take?

Typical duration: Six to 12 months

If you think your company is insolvent, you should seek professional advice from an Insolvency Practitioner (IP) at your earliest opportunity. They will explain your options and, if your company is beyond recovery, guide you through the Creditors’ Voluntary Liquidation (CVL) process.

A CVL can take as little as six months for simple companies with no assets, or up to 12 months or more in complex cases with outstanding legal disputes and assets that are more difficult to sell or recover.

• Week 1 to 2 - You seek initial advice from an IP.  They will carry out a financial assessment and confirm whether the company is insolvent. They’ll also assist you with preparing a Statement of Affairs and drafting a report for the creditors.
• Week 2 to 3 - You hold a board meeting to propose voluntary liquidation. You then ask the shareholders to pass a special resolution to wind up the company and nominate a liquidator.
• Week 3 to 4 – The liquidator will formally notify the creditors of the liquidation. If they do not object or request a virtual meeting, the liquidation will proceed under the deemed consent procedure. Creditors can confirm the shareholders’ choice of liquidator or nominate an alternative.
• Week 5 - The liquidation officially begins and the IP takes control as the liquidator. They notify Companies House and place an advert in The Gazette. That makes the liquidation public knowledge.
• Week 6 to 20 - The liquidator identifies and sells company assets, and investigates the reasons for the company’s failure and the conduct of directors. They will file a Director Conduct Report with the Insolvency Service, which may decide to investigate further or initiate proceedings. They may also seek to recover any overdrawn directors’ loan accounts.
• Week 20 to 48 - The liquidator uses the funds raised from the sale of assets to cover the costs of the liquidation and repay creditors in a strict order.
• Week 48 to 52 - The liquidator prepares a final account of the liquidation, which they send to Companies House and share with the creditors. The company is then dissolved and any remaining unsecured debts are usually written off. 

How long does Compulsory Liquidation take?

Typical duration: One to two years

Compulsory liquidation follows a different process from the two voluntary procedures, particularly in its early stages. A creditor with an outstanding debt of £750 or more can initiate the procedure.

As it involves court action and additional legal and administrative steps, Compulsory Liquidation takes time. Crucially, the directors also have no control over the timing of the process. That means you could be forced into liquidation while attempting to rescue the company.

• Week 1 to 3 - A creditor files a Winding Up Petition with the court and serves it on your company. You have seven working days to respond. A winding up hearing is also arranged for a few weeks later.
• Week 3 to 6 - The Winding Up Petition is advertised in The Gazette at least seven days before the hearing. At that point, the company bank accounts may be frozen, seriously affecting your ability to operate or settle the debt.
• Week 6 to 10 - If you do not repay the debt, the court will hear the petition and decide whether to liquidate the company. If the court decides to liquidate, it will make a Winding Up Order and control of the company will be handed to a government liquidator known as the Official Receiver.
• Week 10 to 40 - The Official Receiver notifies the creditors, secures company assets and begins the process of asset realisation. They may appoint an independent Insolvency Practitioner if the case is complex or there are significant assets to sell.
  The liquidator also investigates the company’s failure and the conduct of its directors. The Insolvency Service reviews these findings and may pursue enforcement action. Penalties such as director disqualification or personal liability are more common in Compulsory Liquidation, particularly where there has been misconduct or a lack of cooperation.
• Week 40 to 52 - The liquidator asks the creditors to submit proof of their debts and processes their claims. They then distribute the funds raised from the asset sales in priority order.
• 12 to 24 Months - The liquidator prepares a final report and submits it to Companies House. The company is removed from the official register and dissolved around three months later. 

How can you liquidate a company more quickly?

There are several steps you can take to liquidate a company more quickly, particularly in voluntary liquidations. However, the timescale is also reliant on the complexity of the case and the efficiency and responsiveness of your Insolvency Practitioner.

• Seek professional advice early - delays can lead to complications
• Cease trading and bring all unnecessary contracts and services to an end
• Put your company into a voluntary liquidation procedure rather than waiting for your creditors to act
• Cooperate fully with the liquidator throughout the process
• Prepare accurate company records, including an up-to-date balance sheet and profit and loss statement, a list of assets, liabilities and creditors, and employee names and contact details
• Give the liquidator access to all company assets
• Resolve any overdrawn directors’ loan accounts
• Assist with asset valuations and sales as requested

Expert company liquidation support

So, how long does it take to liquidate a company in the UK? Many factors determine the exact timeline, but with the right help, it may be possible to liquidate a simple company in three to six months.

At Real Business Rescue, with 35+ years of experience and almost 100 in-house Insolvency Practitioners, we deliver an efficient, timely and seamless service, and work to protect your interests throughout. Please get in touch for a free consultation or arrange a meeting at one of our 100+ offices throughout the UK.