How long does liquidation take? A Directors Guide

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Navigating the choppy waters of business can be challenging, and sometimes, despite best efforts, a company may need to consider liquidation. This decision is never an easy one, especially for directors who have invested significant time, energy, and resources into their enterprise. This article serves as a guide for those directors who find themselves considering the liquidation process and ask “How long does liquidation take?”

We will delve into the concept of liquidation, exploring its various types, including voluntary liquidation, creditors voluntary liquidation, and compulsory liquidation. We aim to illuminate the journey, providing a comprehensive timeline and explaining the process step-by-step. Moreover, we will address some of the most frequently asked questions and common concerns associated with liquidation proceedings. Whether it is a demand or petition for liquidations, we will guide you through the process to ensure that everything is handled properly.

Whether you’re a director trying to determine the best course of action for your struggling business, or you’re simply seeking to broaden your understanding of company liquidation, this guide intends to equip you with the knowledge needed to navigate the process confidently and efficiently.

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Understanding Company Liquidation

Liquidation, in its most basic form, is the process through which a company’s operations are brought to an end, and its assets are divided among creditors and shareholders. The primary purpose of liquidation is to ensure that all the company’s affairs have been dealt with appropriately.

The implications of liquidation are significant, as it marks the termination of a company’s existence. Liquidation can occur voluntarily, driven by a company’s directors or shareholders, or can be compelled by creditors or the court in a process known as compulsory liquidation.

Understandably, it’s a process steeped in legal and financial complexities, and it necessitates an insolvency practitioner‘s appointment as a liquidator. This liquidator takes control of the business, ceases its trading, sells its assets, and finally, uses the proceeds to pay off its debts as much as possible.

Liquidation may be a way for an insolvent company to deal with its debts and allow directors to move on, but it also signifies the end of a business venture. In the case of compulsory liquidation, it may even involve court proceedings. Therefore, understanding the process and knowing what to expect can help directors better navigate this challenging time and mitigate any potential fallouts.

Different Types of Liquidation

Liquidation is not a one-size-fits-all process, and the procedures involved can differ depending on the specific circumstances of the company. Typically, there are three main types of liquidation that directors should familiarise themselves with:

Voluntary Liquidation

This process is initiated by the directors and shareholders of a company. It typically occurs when those involved believe that the company has no viable future, or when it’s a suitable time to end the business. Voluntary liquidation is further subdivided into two categories:Members’ Voluntary Liquidation (MVL): This type of liquidation happens when a company is solvent, meaning it can pay its debts in full within 12 months, but the directors or shareholders decide to stop trading for some reason. Perhaps they are retiring, or they feel that the company has served its purpose.Creditors’ Voluntary Liquidation (CVL): In contrast to MVL, a CVL takes place when a company is insolvent and cannot pay its debts. The directors acknowledge this and decide to stop trading to prevent further debts from accruing.

For more information see our dedicated page on Members Voluntary Liquidation

Compulsory Liquidation

This is a much more severe process and occurs when a company has been ordered by the court to liquidate, usually following a petition from creditors. The primary reason for this is that the company cannot pay its debts. Once the court order for liquidation is issued, the company’s control is given over to an official receiver (typically from the Insolvency Service), who will liquidate the company’s assets to pay the creditors.

For more information see our dedicated page on Compulsory Liquidation

Each type of liquidation carries different implications, responsibilities, and procedures for directors, creditors, and shareholders. As such, it’s crucial to understand each one and seek professional advice before deciding which path to take.

For more information see our dedicated page on Creditors Voluntary Liquidation

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The Timeline of Company Liquidation

The time it takes to liquidate a company can vary significantly depending on the circumstances. It’s a process that can last several months or even years. However, understanding the typical timeline can help set realistic expectations and assist in planning the next steps.

Initiation Phase

At the start of the liquidation process, a decision must be made about the type of liquidation that is most appropriate for the company’s situation, whether it’s voluntary or compulsory. The company directors must hold meetings with shareholders and creditors to inform them about the impending liquidation. Notice of these meetings should be given, but in some cases, the meeting can take place on short notice.

Appointment of a Liquidator

Following the decision to liquidate, a licensed insolvency practitioner is appointed as the liquidator. In cases of compulsory liquidation, the court may appoint an official receiver from the Insolvency Service. The appointment may take a few days to a couple of weeks.

Asset Liquidation Phase

The liquidator then takes control of the company’s assets. The business assets are valued and sold off to pay creditors. This can take a few weeks to several months, depending on the complexity of the company’s assets and the state of the market.

Claims and Distribution

Once the assets are sold, the liquidator uses the proceeds to pay off the company’s debts. Creditors submit their claims, and the liquidator verifies these before paying them in the order set by law. This process can take several months, especially if there are disputes about claims.

Final Stage and Dissolution

After all debts and expenses have been paid, the liquidator prepares a final report for the creditors and the Insolvency Service detailing the actions taken. The company is then formally dissolved, usually around three months after the final report is submitted.

In general, the process of liquidation can take six to 24 months. The vast majority of this time is spent in the asset liquidation and claim stages. However, it’s worth noting that each case is unique, and the timeline can be affected by various factors such as the size of the company, the nature of its assets, the number of creditors, and whether there are any legal disputes. It’s recommended to seek professional advice to understand the likely timeframe for your specific circumstances.

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The Steps in the Liquidation Process

Understanding the process of liquidation is key for any director considering this option. It can seem overwhelming, but breaking it down into steps can make it more manageable.

Decision to Liquidate

The first step is making the decision to liquidate the company. This can be a difficult choice, but if the company is insolvent and cannot pay its debts, it might be the only viable option.

Consult an Insolvency Practitioner

It’s crucial to seek advice from a licensed insolvency practitioner. They can guide you through the process, help you understand the implications, and ensure that you meet all your legal responsibilities.

Shareholders’ Meeting

In a voluntary liquidation process, the directors must call a meeting of the shareholders to propose the liquidation. If 75% of shareholders agree, the company can proceed with the liquidation.

Creditors’ Meeting

A meeting of the company’s creditors must be held within 14 days of the shareholders’ decision. This meeting can be conducted on ‘short notice’ with the consent of at least 90% of the company’s creditors. If the creditors agree, the ‘deemed consent’ process can be used, meaning that if no objections are raised by the creditors, their consent is presumed.

Appointment of a Liquidator

The creditors have the right to nominate a liquidator. In cases of a creditors voluntary liquidation (CVL), the liquidator is usually appointed by the directors. For compulsory liquidation, the court appoints an official receiver from the Insolvency Service.

Winding Up the Company

The liquidator takes control of the company, ceases trading, sells the company’s assets, and uses the proceeds to pay off the creditors.

Distribution of Assets

The liquidator must distribute the assets in a specific order, as defined by the Insolvency Act. Any remaining funds, after paying the creditors and covering the costs of liquidation, are distributed to the shareholders.

Dissolution of the Company

Once all assets have been distributed, the liquidator sends a final report to the court and to the Insolvency Service. The company is then formally dissolved.

It’s worth noting that this is a simplified overview of the process. Each case can have its complexities, and the duration can vary widely. However, by understanding the steps involved, company directors can be better prepared for what lies ahead.

The Role of the Liquidator in the Liquidation Process

A liquidator plays a crucial role in the liquidation process of a company. Appointed at the beginning of the proceedings, the liquidator is often an insolvency practitioner who assumes control of the company’s affairs.

Their main responsibility is to liquidate the company’s assets in a manner that maximises the return for the creditors. This typically involves the sale of the company’s assets, collection of outstanding debts and the distribution of the proceeds to the creditors in accordance with the law.

Beyond these tasks, the liquidator also has a duty to investigate the company’s affairs. They must determine if any wrongdoing has occurred, such as wrongful trading or fraudulent behaviour by the directors. Should they uncover such conduct, the liquidator has a duty to report this to the Insolvency Service.

In the case of a creditors voluntary liquidation (CVL), the liquidator is usually appointed by the director. For compulsory liquidation, the appointment is made by the court.

The liquidator’s role is crucial and they have substantial powers to ensure the process is fair and efficient. However, their duty is ultimately to the creditors, ensuring as much debt as possible is repaid. For this reason, it’s vital for directors to seek independent advice before deciding to liquidate their company.

The Impact of Liquidation on Different Parties

Liquidation inevitably impacts various parties associated with the company, each in different ways.


The primary aim of liquidation is to repay creditors. In this process, secured creditors, typically banks or financial institutions, are paid first from the proceeds of the business assets sale. Unsecured creditors, like suppliers or customers, are paid afterwards, and in many cases may only receive a portion of what they’re owed, or in some unfortunate circumstances, nothing at all.


For directors, liquidation can be a stressful and difficult time. It means the end of their business venture and could lead to potential investigation into their conduct as directors. Should wrongful or fraudulent trading be identified by the liquidator, they could face legal action. In compulsory liquidation, directors can also be disqualified from being involved in the management of any company for up to 15 years.


Employees are often caught in the crossfire when a company goes into liquidation. They may lose their jobs and any unpaid wages or redundancy pay becomes a debt of the company. However, employees have some protection under the government’s National Insurance Fund, which can cover certain outstanding payments.


In most cases, shareholders will lose their entire investment during liquidation, as they are the last in line to be repaid after all other debts have been settled.

It’s important to understand that once a company becomes insolvent, the directors’ duty shifts from the shareholders to the creditors. This change can be a challenging process for many directors, especially those of a limited company who have been accustomed to running the business with relative autonomy.

In the final report produced by the liquidator, the outcomes of the liquidation process, including the impact on these various parties, will be detailed. It’s a comprehensive document that marks the end of the company’s journey, shedding light on what went wrong and the financial aftermath of the liquidation.


Liquidating a company is a significant decision and often the last resort for directors facing insurmountable financial difficulties. The process is complex, can take many months to complete, and its impact reverberates across a variety of stakeholders, from creditors and employees to directors themselves.

The liquidation types, whether voluntary liquidation, creditors voluntary liquidation or compulsory liquidation, each follow a distinct process, driven by different circumstances. Regardless of the type, the appointed liquidator plays a critical role, steering the company through the process and ensuring compliance with the rules set by the insolvency service.

While this article provides a broad overview of the liquidation process and its many facets, it’s essential for directors to remember that every situation is unique. Thus, seeking professional advice before taking the step to liquidate is paramount. An insolvency practitioner or a trusted financial advisor can provide bespoke advice, grounded in the specifics of your business and its financial health.

In conclusion, understanding the liquidation process is not only crucial for company directors considering this path but also beneficial for business owners seeking to increase their financial literacy. It allows for better risk management and more informed decision-making, contributing to the overall resilience and longevity of the business.


What is a CVL?

CVL, or Creditors Voluntary Liquidation, is a process where the directors of an insolvent company voluntarily decide to wind up the business. This is typically due to the company’s inability to pay its debts as they fall due.

What does ‘winding up’ mean?

Winding up is the process of selling all the assets of a company, paying off creditors, distributing any remaining assets to the principals or shareholders, and then dissolving the company.

What does the ‘liquidation process’ involve?

The liquidation process involves several steps, including deciding to liquidate, appointing a liquidator, ceasing trading, the liquidator taking control of the company’s assets, the liquidator paying the creditors to the extent possible, and finally, the dissolution of the company.

What happens to the company’s employees during liquidation?

Employees are typically made redundant when a company enters liquidation. However, in some cases, if the business or parts of it are sold, employees may be transferred to the new owner.

How long does the liquidation process take?

The time it takes for a company to go through the liquidation process can vary. On average, it might take 6-12 months, but it can be shorter or longer depending on the complexity of the company’s affairs.

These are just a few of the questions company directors may have when considering liquidation. As always, it’s important to seek professional advice to understand the full implications of liquidation.


The primary sources for this article are listed below.

The Insolvency Service – GOV.UK (

Details of our standards for producing accurate, unbiased content can be found in our editorial policy here.

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