How Long Does Voluntary Liquidation Take?
A company can only be placed into voluntary liquidation by its own directors agreeing and instructing then shareholders passing the required resolution. This begins the liquidation process and an authorised insolvency practitioner must, at this point, be appointed to oversee the members’ voluntary liquidation process or the creditors’ voluntary liquidation process. Let us first take a look at the two different types of voluntary liquidation, which will help us answer the question of how long does voluntary liquidation take?
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Four Key Questions on Voluntary Liquidation
How Does Members’ Voluntary Liquidation Work?
The members’ voluntary liquidation process is one where the shareholders of a company have decided to place the company into liquidation. In this instance there is enough value left in the remaining assets of the company in order to pay all the debts owed out to creditors, plus statutory interest. What this means, is the company is still solvent.
In order to begin the liquidation process in this way the directors of the company must first make a formal declaration of solvency. This document must be written and agreed upon by the majority of company directors no more than five weeks before the resolution for the voluntary winding up process is passed. It will include all relevant and up-to-date company assets and liabilities within a single statement, and state that all directors of the company have conducted a full and thorough inquiry into the affairs of the company and that they are happy that the company can repay all debts and interest within a 12-month period.
The declaration of insolvency is filed at Companies House as the company enters liquidation. The shareholders of the company must hold a general meeting where a resolution is passed to begin the process of the voluntary winding up of the company, and at the same time appoint an individual (or multiple individuals) to the role of liquidators of the company. If at a later date the newly appointed liquidator discovers that the company is not, in fact, solvent, a meeting of the creditors will be called and the liquidation process becomes one of a creditor’s voluntary liquidation.
How Does Creditors’ Voluntary Liquidation Work?
Compared with Members’ voluntary liquidation, this version takes place where the shareholders of a company have decided to put the company into liquidation but at this point the company does not hold sufficient assets to repay creditors in full. What this means, is that the company is insolvent. Once a resolution to wind up the company has been passed by the shareholders, the liquidation process can begin.
In order to vote for creditors’ voluntary liquidation, the shareholders must hold a general meeting of the company, to pass a resolution to wind up the company. This is in much the same way as the Members’ Voluntary Liquidation process.At this point, a company can choose to nominate an insolvency practitioner to the role of liquidator.
A decision date for creditors should also be called either on the same day, or close to, the same day as the shareholders’ meeting. This is the time that creditors are given to object to the appointment of the liquidator or request a physical meeting. If the creditors wish to nominate a different liquidator than that put forward by the shareholders, a vote will take place at a physical meeting to determine which insolvency practitioner is appointed.
What Happens during the Liquidation Process?
Once the liquidator is appointed, the powers of the directors cease, and the liquidator assumes responsibility over the company’s affairs. All company assets will be valued, and then realised for the benefit of creditors. First the costs and expenses of the liquidation are deducted, with all other creditors -secured, preferential and unsecured – paid in stages until all of the money has been used up.
- Members’ Voluntary Liquidation Process – The liquidator has a duty reporting to the members every year, releasing details of all actions and dealings in the past year relating to the winding up of the company.
- Creditors’ Voluntary Liquidation Process – The same progress report must be circulated to creditors, and the liquidator also has to conduct a report into the conduct of any company directors who have been in office in the 3 years prior to the date of winding up. A final progress report is circulated and filed at Companies House, once the affairs of the company have been fully wound up. This is true in both MVLs and CVLs.
What are the Specific Duties of the Directors during Liquidation?
During voluntary liquidation, company directors have to provide all information about the company to the liquidator, attend any interview requests with the liquidator and hand over all company assets. During the process the liquidator must have access to everything they need, from company books, records, employee records, bank statements, insurance policies and all relevant documents relating to the company’s assets and liabilities.
How Long Does Voluntary Liquidation Take?
Once the liquidator has circulated the final report to shareholders and/or creditors, there is an 8-week period for creditors/members to object to the liquidator’s release. Of course, each case is completely unique, and depending on the nature and scale of the assets involved, and the number of creditors and money owed, the length of time could vary significantly.
The Insolvency Experts have built up a wealth of knowledge over the years, assisting business owners in gaining control over their business during a troubled time and carefully looking after the insolvency process in those circumstances. You can reach us by either phone or email to find out more information on how we can help your business through any voluntary liquidation process. Get in touch with our expert team today to find out more.