When a company reaches the point where it needs to close down, liquidation is often the most practical and responsible route forward. However, not all liquidations are the same. The process, timeframe, and outcomes can vary significantly depending on whether the company is solvent or insolvent at the time of closure.
How long does liquidation take? We’ll explain what each process involves, how long liquidation typically takes, and the key stages you can expect along the way.
What Is MVL?
MVL – or Members’ Voluntary Liquidation – is a liquidation process by which a solvent company can wind down its operations and close the company, allowing shareholders to extract the value of their stake in the company as cash in a tax-efficient manner.
To be eligible to undergo an MVL process, the company must be able to pay off all of its liabilities within 12 months, and a signed declaration of solvency from a director is required.
How Long Does Liquidation Take With The MVL Process?
Around three months is the expected timeframe for a complete MVL process from start to finish. It can vary quite a lot depending on a number of different factors, though, including the complexity of the operation and how prepared directors are to proceed. When everything is in order, though, it’s quite a smooth process. Consult with a licensed insolvency practitioner for a more accurate estimation of time based on your own circumstances.
MVL Timeline
Here’s the full timeline of a Members’ Voluntary Liquidation:
- A licensed insolvency practitioner is appointed on behalf of the directors and shareholders.
- Company directors sign the Declaration of Solvency.
- A resolution to wind up the company is agreed on.
- Creditors are notified, and an advertisement is put in the Gazette.
- All assets are sold, and funds are distributed.
- The company is removed from the register.
What Is CVL?
CVL stands for Creditors’ Voluntary Liquidation. Unlike an MVL, a CVL is carried out when a company becomes unable to pay its debts to its creditors, and its financial state has deteriorated to a point where a CVA or other business rescue strategies are deemed unviable. It is always carried out with a view to securing the best possible result for the company’s creditors.
How Long Does Liquidation Take With The CVL Process?
CVL normally takes anywhere from 6-24 months to complete, owing to the complexity of the process compared to a much simpler MVL. A CVL involves an investigation into directors’ activity, navigating strict legal frameworks and handling of employees and assets, all of which makes the process quite complicated.
CVL Timeline
A CVL process following the following timeline:
- A board meeting is held to decide on undergoing a CVA. Advance notices of at least three days are sent to shareholders and creditors.
- Shareholders meet to pass a resolution to liquidate the company.
- Creditors jointly appoint a licensed insolvency practitioner to oversee the process.
- An advertisement is put in the Gazette, and Companies’ House is notified.
- The liquidator handles the sale of assets, investigation of directors and communication with creditors until liquidation is complete.
- The company is removed from the register.
If you need any more information, feel free to reach out to us at Ballard Business Recovery. We’re experts in our field with plenty of experience, and we’ll be happy to help you with your company’s liquidation if you need our services.
