If your company is insolvent and you wish to wind it up, it is important to understand the subject of how long does it take to wind up a company, to understand your time-frame, see light at the end of the tunnel and get on with your life. If you find yourself in this situation, you will need to learn a little about how Liquidation works to enable you to:
- Take the necessary and appropriate legal steps for both you and your business.
- Ensure that you protect your financial interests wherever possible.
Here at The Insolvency Experts, we have a great deal of experience advising clients on questions such as how long does it take to wind up a company, as well as any other information related to the length of a winding up process. In this summary, we’ll explore how long it takes to liquidate a company and key liquidation procedures.
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Four Key Questions on how long does it take to wind up a company?
What different types of winding up method are there?
In beginning to look at the question of how long does a winding up process take, it is important to understand the methods by which it would take place, namely Liquidation. There are two types of Insolvent Liquidation – voluntary and compulsory.
The most appropriate option depends whether you decide to go into Liquidation yourself or are forced into it by your creditors. Either way, it’s a process which will result in the dissolution of your company. You’ll stop trading, your employees will be made redundant and your business assets will be sold to pay creditors.
There are two types of insolvent Liquidation. The first is a Creditors’ Voluntary Liquidation (CVL). This is where the directors choose to put the company into Liquidation. The second type is where the company is pushed into Liquidation by creditors at a court hearing. This is known as Compulsory Liquidation.
In practice, directors usually try and avoid Compulsory Liquidation as the Liquidator is appointed by the court, which means they have less control of the situation. Directors have a duty to cooperate with the Liquidator.
This is also known as Creditors Voluntary Liquidation (CVL) and usually occurs when directors realise the business is insolvent and there is no chance of restructuring. The majority of the shareholders sign a resolution to go into Liquidation. 75% of shareholders by value must approve if the Liquidation is to go through. There is no longer the requirement for a creditor’s meeting and the liquidation can now proceed via a ‘decision procedure’, however, creditors may still request a meeting.
Creditors meetings can be held virtually via video conferencing although a physical meeting can still be requested. From the day the directors agree to Liquidate, it usually takes around 14 days to put a company into CVL. However, if 90% or more of all shareholders agree to short notice, then the CVL can happen within seven days which is the minimum statutory notice period to creditors.
A Compulsory Liquidation is a court driven process. From the initial threat from creditors to begin the process, it can take two or three months before the Compulsory Liquidation actually happens, so it’s much slower than CVL. The process is also out of the control of the directors, which makes this a less favourable options.
It begins when a creditor serves a statutory demand on a company giving it 21 days to pay, or 18 days to set the demand aside. If the company fails to pay or refute the demand, the creditor can apply to the court for a winding up hearing. The company which is to be liquidated must be given 14 days written notice of the hearing. At this hearing, the court will decide whether a winding up order should be granted and if it is, this will result in the Liquidation of the company.
How long does it take to wind up a company through liquidation?
With regards to the length of a winding up process, the appointment of a Liquidator, who takes control of the business and the assets from the directors, usually takes between one and two weeks. However, if more than 90% of shareholders agree to short notice, Liquidation can happen within seven days which is the minimum statutory notice for creditors.
This isn’t the end of the story – no matter what type of Liquidation, the length of time until the Liquidation is closed and the company dissolved is dependent upon the complexity of the company’s affairs and the amount of work required by the Liquidator.
What must a liquidator do to complete the winding up process?
As you consider how long does a winding up order take in relation to your specific circumstances, it is helpful to know all the steps that need to be completed. In order to wind up the company, the Liquidator must:
- Realise assets: The Liquidator will need to take action to realise company assets. For example, if the company owns property, it will need to marketed and sold.
- Deal with staff issues: Claims by employees will need to be reviewed and forwarded to the Redundancy Payments Service to enable payment to be made from the National Insurance Fund, if applicable.
- Review creditors’ claims: If there are sufficient funds available for a distribution to creditors, the Liquidator must advertise for claims and then review any claims to check that they are valid. Any funds available for distribution to creditors will then be shared pro rata between creditors whose claims have been accepted, based on the value of those claims.
- Investigations: The Liquidator is required to carry out a certain amount of investigation into the company’s affairs to ascertain whether any further realisations can be made and also to check how the company was run.
For a Liquidation with no or few assets and a small number of creditors, it would be expected for the Liquidation to be closed within 6 to 9 months and the company dissolved 3 months thereafter. However, if there are many or complicated assets to be realised, then the Liquidation can last longer.
There is no legal time limit on company Liquidation and the length of time it does take depends on the company’s situation and the type of Liquidation being undertaken.
Once the Liquidator has carried out all of the tasks required, a final report is issued to who have 8 weeks to object to the dissolution. The Liquidator then submits final paperwork to Companies House and the company is finally dissolved around 3 months later.
How do I find the right help with my winding up process?
Deciding on Liquidation and whether it is an appropriate solution depends on your circumstances. There are many aspects to consider, including the details mentioned here on how long does a winding up process take.
If you are the director of a company which is in financial distress you should take professional advice without delay. Likewise, if you are a creditor struggling to recover a debt we can help. Contact our experienced team now on 0300 303 8284, or complete the form below letting us know when is best to contact you.