If you have an insolvent Limited Company on your hands that is awaiting liquidation, it’s always handy to know how long the process is going to take. This allows you to get on with your life minus the constant worry of when progress will be made.
Understanding how liquidation works is essential whenever you’re in a situation like this, as it allows you to take the necessary steps for both you and your business venture. The quicker you can sort out the paperwork and get through all the tasks at hand, the less time the process will take. Remember that as a director, it is your responsibility to always cooperate with the liquidator.
We will now walk you through how long it takes to liquidate a company and provide you with the details you need to know about the liquidation procedure.
What is meant by liquidation?
Which one you pick relies upon whether you choose to go into liquidation yourself or are forced into it by your creditors.
Regardless, this process will bring about the disintegration of your business. You’ll stop exchanging, your representatives will be made redundant, and your business resources will be offered to pay creditors.
Recap of the liquidation process:
- Voluntary liquidation or Creditors Voluntary Liquidation (CVL)
A CVL is the type of liquidation where shareholders choose to liquidate a company. This typically happens when they understand that the business is insolvency.
The initial step is the point at which most of the business’ board sign a resolution to go into liquidation.
Investors then, at that point, go to a meeting to support this choice. 75% of these stakeholders must support the liquidation in case it’s to go through.
Then, at that point, as a rule around the same time, banks go to a separate meeting to support the organisation’s move into liquidation and choose a liquidator. As a rule, there’s a hole of around thirty minutes between these two meetings. Creditor’s meetings can now be done for all intents and purposes by means of video conferencing. An actual meeting can be requested under particular conditions.
- Compulsory liquidation
This interaction is much slower than a CVL, and the business has zero power over the offer of resources. The Insolvency Services charges 17% tax on all assets that are realised this the most un-ideal choice of the two.
Mandatory liquidation starts when creditors or lenders serves a statutory demand giving you 21 days to pay, or 18 days to settle the outstanding debts.
If you don’t pay or apply to have the statutory demand set aside, the creditor can apply to the court for a winding up hearing. The company that has the outstanding debt must be given 14 days’ written notice of the hearing in the County Court or High Court.
During this hearing, the court will choose whether the appeal should change to a winding up request, bringing about the liquidation of the company.
How long does it take to liquidate a company?
To place a company into liquidation this can be done within seven days, subject to 75% of shareholders consenting to short notification, the first stage of liquidation can occur inside seven. This is the base legal notification for lenders.
It doesn’t stop there in that the appointed liquidator once appointed will need to realise the value of the businesses assets and examine the companies bookers and records, agree creditors claims and workout what dividend is to be paid out. This can require 1-2 years, if not longer. The greater the liquidation, the longer it takes (as a rule).
For a compulsory liquidation, the time between the underlying danger and the finish of-court procedures is typically three months.
How long does liquidation last
There is no set time limit as to how long liquidation lasts, but in general the process can take between six and 24 months to fully liquidate a company.
Obviously, it relies upon the type of liquidation that has been carried out and the complexity of the investigation into the failing of the company by the liquidator or official receiver.
Credits will be aware that the cycle of the liquidation is comparing to a close once they receive the last creditors report into the directors conduct and the process of the liquidation.
If the liquidator has files an adverse directors report to the disqualification unit at the Insolvency Service for wrongful or fraudulent trading, it can request to keep the liquidation open for an extended period.
In case you are viewed as guilty of wrongful or fraudulent trading, you could be expected to take responsibility for the company’s obligations. This is especially obvious if you have acted inappropriately or or shown advantage to connected parties.
If you have acted correct as an officer of the company you will be entitled to claim a redundancy from the government like any other employee.
You would then be able to begin your next adventure either as a director of an alternate business or in something else entirely.