Are you a company director thinking about liquidating your company? Then you’re in the right place. We provide trusted advice for company directors regarding liquidation and company rescue. In this blog, we’re looking at the complete liquidation timeline: from insolvency to dissolution.
Before you start looking into liquidation methods, you need to make sure this is the right step that you want to take. After a liquidation has begun, it’s unlikely that you’ll be able to go back, unless in very rare cases.
As you may be aware from researching, various methods of company closure can be used. The most important factor when deciding which one is right for you is whether your company is solvent or insolvent. This relates to your company’s financial situation.
Solvent company: A solvent company can afford to pay its debts when they fall due. Additionally, its assets will be worth more than its liabilities.
Insolvent company: An insolvent company cannot afford to pay its debts when they fall due. It is likely to owe more money in liabilities than it has in assets.
If you are concerned that your company has become insolvent, then you need to seek professional advice as soon as possible. When a company is closed, a director’s conduct report must be completed. If you are found to have continued trading while insolvent, you will face the consequences. This is labelled as wrongful trading and can result in fines and other consequences.
Formal insolvency proceedings or informal company closure
A formal limited company liquidation method may include a creditors’ voluntary liquidation, compulsory liquidation or members’ voluntary liquidation. An informal method of closure may include a strike off (dissolution). Strike-off is only appropriate when the company has no debts, no liabilities and has not traded in the last 3 months.
All formal liquidation methods require the appointment of a licensed insolvency practitioner. Their role is to help you close the company and identify any potential risk of wrongful or fraudulent trading.
If you are worried about any wrongful or fraudulent trading, you need to tell the insolvency practitioner up front. This will be uncovered, and you will face the consequences. It will be much better if you are honest in the beginning.
Bounce-back loans and other debts
Many businesses took out bounce-back loans in 2020, and many will still be paying them off. There are some restrictions on company closures if you still have an outstanding bounce-back loan. For example, companies with outstanding loans, not just bounce-back loans, cannot use a strike-off procedure.
If you attempt to dissolve a company with an unpaid bounce-back loan, it’s likely that creditors, such as HMRC or the British Business Bank, will object and pursue compulsory liquidation.
Liquidation timelines
Before choosing a liquidation or strike-off method, consult the experts at 1st Business Rescue. We have the skills, knowledge and expertise to ensure that you choose the most suitable method for your needs. Read about the 2025 budget changes and how they impact liquidation.
Members’ voluntary liquidation (MVL)
This liquidation method can only be used by businesses that can settle all outstanding debts before proceeding with liquidation. It is for solvent companies and an insolvency practitioner should be appointed.
Since all debts must be settled before proceeding, the MVL process can usually be completed more quickly. You can expect an MVL to be completed within 6 to 12 months. Be aware that there are some factors that can increase the time it takes for the process to be completed.
MVL Process
- Complete the declaration of solvency
- Appoint a licensed insolvency practitioner
- The insolvency practitioner will sell the business assets
- Money generated from assets can be distributed among secured and unsecured creditors, if there are any. Typically, debts are settled before the MVL can begin.
- Any leftover money is shared among the shareholders of the company
- Final reports are prepared
Creditors’ voluntary liquidation (CVL)
This is the most commonly used method of company liquidation. It involves the company’s director volunteering to place it into liquidation, which can reflect positively on them. Choosing this method when your company begins to struggle is a good example of directors adhering to their duties.
Insolvent companies can use this method. Provided that no wrongdoing is found and no personal guarantees have been signed, the company’s debts will typically be written off during the liquidation process. The insolvency practitioner will be searching for evidence of wrongdoing and they will want to check that any bounce-back loans, if taken, were used correctly.
You can expect a creditors’ voluntary liquidation to take between 12 months and 24 months. As mentioned above, there are several factors that may affect the speed at which the process is completed. Read our blog on cross-border insolvency.
Creditors’ voluntary liquidation process
- Directors request a resolution to liquidate the company
- A creditors’ meeting is held to approve the process
- A licensed insolvency practitioner is appointed
- Company assets are realised
- The money generated from asset realisation is distributed among secured and unsecured creditors
- Final reports are prepared
Compulsory liquidation
Waiting until you are forced into compulsory liquidation is generally not advised, as it does not reflect positively on you, as you have not adhered to your duties. This process is forced upon directors by their creditors, who have tried to access the money they are owed.
The process begins with a winding-up petition and can be stressful for directors to deal with.
On average, a compulsory liquidation can take anywhere between 12 and 24 months, or longer if there are complexities to handle.
Compulsory liquidation process
- Directors fail to pay the money owed to creditors
- A winding-up order is sent by the court, along with a date by which payment must be made
- If creditors are still not paid, the court will appoint an insolvency practitioner
- The company’s affairs will be investigated
- Company assets are realised
- The money generated from asset realisation is distributed among creditors
- Final reports are prepared
What impacts the liquidation timeline?
There are many factors that can impact the liquidation timeline. Here are just a few of them. Your insolvency practitioner will be able to provide you with a more accurate idea of how long the process should take and any factors that may affect the timelines.
- Complex company assets – property or intellectual property belonging to the company
- Claims by creditors
- Poor director conduct – wrongful or fraudulent trading
- Legal proceedings
- Incomplete records – financial records
- Company size – larger companies may take longer
How can I speed up the liquidation process?
There are some steps you can take to make the liquidation process more efficient. However, you should be aware that general delays may occur throughout the process.
Seek advice early
The earlier you seek advice, the sooner the process will be finished. We understand that this may be a stressful time for you, and we would always encourage you to seek professional advice.
Ensure accurate records
Companies often experience delays when they have not maintained up-to-date or accurate financial records. The insolvency practitioner will require this information, so you’re better off having it ready beforehand.
Ensure cooperation
By ensuring that all communications are responded to in a timely manner, you could potentially speed up the process. Read more about hospitality business liquidation.
There are various methods of company closure, but you must seek trusted advice to determine the most suitable option for you. Once the company is closed, it will be removed from the Companies House register.
Are you looking for liquidation and closure advice? Contact our friendly team at 1st Business Rescue for a confidential chat today.
Justin Barker
I’m Justin Barker, the Managing Director at 1st Business Rescue. I have over 25 years of experience providing insolvency advice to business owners.
I understand how challenging it can be when dealing with financial difficulties within your business. It’s easy to ignore the problem and hope that it disappears, but this is often the worst thing you can do. Our dedicated team is here to provide honest, valuable advice to help UK directors deal with their personal situations in the most appropriate way.
No case or circumstance is the same, but I can guarantee that I am there to give you the best advice.
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