The quick answer
If a business goes into liquidation it means:
- The business stops trading with immediate effect.
- The employees are all made redundant.
- The assets of the business will be sold to pay creditors.
In order to liquidate a company, a Licensed Insolvency Practitioner like us will be required. It usually takes around ten days to put a company into liquidation.
In more detail
A CLOSER LOOK AT LIQUIDATION
There are two types of insolvent liquidation. The first is a Creditors’ Voluntary Liquidation (sometimes called a CVL for short) and is where the directors choose to put the company into liquidation. This takes about 10 to 14 days.
The second type of liquidation is where the company is pushed into liquidation by a creditor at a Court hearing. This is known as Compulsory Liquidation. This can take up to three months.
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.
HOW LONG DOES CREDITORS VOLUNTARY LIQUIDATION TAKE?
A Creditors Voluntary Liquidation falls into three stages:
- The majority of the company’s directors sign a resolution to go into liquidation.
- Shareholders are then given notice of an extraordinary general meeting to approve this decision. 75% of the shareholders that vote at that meeting will need to agree to the liquidation. Only those that vote count.
- Creditors are given notice of a separate meeting, to approve that the company going into liquidation. This meeting usually follows straight after the shareholders meeting on the same day or is held as a deemed consent meeting.
From the day the directors agree to liquidate, it takes around 10 to 14 days to put a company into creditors’ voluntary liquidation. If 90% or more of all shareholders agree to short notice, then the liquidation can happen within eight days (this is the minimum statutory notice period to creditors).
HOW LONG DOES COMPULSORY LIQUIDATION TAKE?
A compulsory liquidation is a Court driven process. From the initial notice from a creditor to start the process, it can take two or three months before the compulsory liquidation actually happens.
- A creditor usually serves a statutory demand that gives you 21 days to pay (you only have 18 days to set it that demand aside).
- Once 21 days have expired the creditor can then apply to the Court for a Winding Up hearing to take place.
- Depending on how busy the Court is, it can take a few weeks to get the hearing date.
- The company to be liquidated must be given at least seven days written notice of the hearing.
THE LIQUIDATION PROCESS
The purpose of liquidation is to get in and realise all the assets and then pay a return to creditors so they get some of their money back.
All of the company’s assets will be sold and the company will no longer be able to trade. The liquidator deals with the sale of the assets, agreeing creditors’ claims and working out what return goes to creditors. This normally takes between three months up to to one year but depends on what assets can be realised.
During this period, the liquidator has to send written annual reports to creditors, along with a final report explaining what has happened. The report includes details of what has been sold, for how much, how it has been paid and how much will be paid back to creditors. It also set out the liquidator’s fees and disbursements.
A Word Of Advice
The type of liquidation your business uses is important and you should consider the problems associated with compulsory liquidation which include:
- It is a much slower process and in the meantime creditors will still chase you.
- It will take longer for employees to get paid from the Redundancy Payments Service.
- There is no control after the event as to how the assets are sold and they cannot be bought back easily.
- The liquidator cannot be chosen.
Therefore it maybe better for you to choose us and use the Creditors Voluntary Liquidation process which is quicker.