The quick answer
In most cases a liquidation lasts just one year.
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.
In more detail
WHAT IS THE PURPOSE OF LIQUIDATING A BUSINESS?
The main purpose is to sell the assets, agree creditors’ claims and then making a pay out to creditors if there are sufficient assets. 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.
IS THERE A LEGAL TIME LIMIT ON BUSINESS LIQUIDATION?
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.
WILL THE COSTS INCREASE IF THE PROCESS TAKES LONGER THAN EXPECTED?
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.