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Creditors meetings can now been done virtually via video conferencing. A physical meeting can be requested under certain circumstances. This process is much slower than a CVL, and the company has no control over the sale of assets.
Compulsory liquidation begins when a creditor serves a statutory demand giving you 21 days to pay, or 18 days to set the demand aside.
If you do not pay or refute the demand, the creditor can apply to the court for a winding up hearing. At this hearing, the court will decide whether the petition should transition to a winding up order, resulting in the liquidation of the company. The appointment of a liquidator, which means that the powers of the directors cease, usually takes between one and two weeks. This is the minimum statutory notice for creditors. It doesn't stop there in that the liquidators now have to sell the assets etc, do investigations and file the necessary paperwork.
This can take years, if not longer. The bigger the liquidation, the longer it takes usually. For compulsory liquidation, the time between the initial threat and the end-of-court proceedings is usually three months.
However, in both cases, this is just the time it takes to approve the liquidation. There is no legal time limit on business liquidation. From beginning to end, it usually takes between six and 24 months to fully liquidate a company. A physical meeting can be requested under certain circumstances. Download our handy Liquidation Process Diagram.
This process is usually initiated by a creditor, and if approved, the company director loses all control of proceedings, including asset sales. In the vast majority of cases, a compulsory liquidation is first warned of via service of a statutory demand, which allows the company 21 days to pay or 18 days in which to contest the debt. A winding up order will be served, and from this point directors have between 7 and 14 days before the court hearing.
At the hearing, the winding up order will be served unless legal representation is used to demonstrate that the debt is not valid. More typically, this part will take 2 weeks. However, the date is relatively flexible to the end that all of the necessary information needs to be collated before this point. Once the practitioner has been approved, their work really begins; asset valuation and sale will be processed, and the necessary inquiries carried out.
The paperwork required from the practitioner is not to be under-estimated; these parts could take years or even longer. The bigger the company with regards to assets and creditors, usually the longer the liquidation will take. In the case of a compulsory liquidation or winding up order , the time up to the court proceedings is usually around 3 months.
In both cases, however, this is just the time that it takes to approve the liquidation. No time limit has been legally applied to company liquidations — usually, it takes between 6 to 24 months for the liquidation process to be completed.
The liquidation may take longer if the Insolvency Service chooses to investigate the possibility of fraudulent or wrongful trading. However, avoiding liquidation will not negate this fact, but make the situation worse further down the line.
Providing that the director has been found to have acted reasonably, a redundancy payment can be claimed from the government if they were on the company payroll for more than 2 years. However, the liquidation process can last longer for more complex cases. It depends on how long it takes to realise assets such as freehold property and other assets such as legal claims which may take some years to get to Court. In the meantime if the liquidator starts to accumulate surplus funds he should pay an interim dividend.
This payment is called a dividend. One other task going on in the background is an investigation into what happened and this can give rise to issues that take longer to resolve. For example, if the Insolvency Service are taking action against the directors for wrongful trading they may ask us to keep the liquidation open or we may try to recover money from someone that is disputing the debt and legal action can, in some cases, take years to resolve.
No, there is no legal time limit on how long a liquidation should last. However, the liquidator must report to creditors annually and should also pay out a dividend sooner than that if the funds held are sufficient. We typically aim to wrap up a liquidation within 12 months as this is more efficient and saves having to do an annual report as well as a closing report.
We take a balanced view on whether or not it is economic to keep a company in liquidation open. If the amount to be recovered is small or it will take a long time this can often outweigh the benefits of keeping the case open. In that case, we may decide to close it.
When the process is coming to an end, the liquidator will send a final report to all creditors which includes a summary of what has happened, a summary of all the receipts and payments and liquidators fees.
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